In early July, the National Treasury caused ripples when it published its latest draft tax law amendments. These amendment, which can be read (here) proposes that the well-known tax exemption, which applies to South Africans working overseas, come to an end.
The current exemption means that any South African who works outside of South Africa for more than 183 days in a calendar year is not subject to local tax by the South African Revenue Services. This has been to prevent so called “double taxation” where employees would be forced to pay tax on one income in both the foreign country as well as South Africa.
However, the National Treasury has reasoned that many such South Africans have been avoiding any tax at all because the jurisdictions that they work in do not require the payment of income tax (Dubai is a prominent example). With this in mind, the new amendments propose to tax all South African residents on their worldwide income and to do away with the 183-day exemption as a whole.
The issue that has been raised is that doing away with the exemption in its entirety means that if a South African does pay foreign income tax, they will still have to pay SARS. This is different to the earlier, and better received, proposal that the exemption merely be amended to make sure that anyone not paying foreign income tax would then have to do so in South Africa. The solution proposed by the National Treasury to this issue, is to make provision for the process of claiming tax credits in terms of the Income Tax Act should you have paid tax in the foreign country, but this is a complicated process and you would still end up liable to pay a portion of tax to SARS.
The proposed amendments are set to be implemented as of March 2019, but the deadline for public comment and participation is the 18th of August 2017. The next step is then a series of planned workshops, hosted by the Treasury, for September where there will be further engagement with all relevant stakeholders.
The draft legislation and the draft explanatory memorandum containing detailed descriptions of the draft amendments can be found on the National Treasury (www.treasury.gov.za) and SARS (www.sars.gov.za) websites.