South Africans living and working abroad for more than 183 days (60 days being consecutive) have up to now been exempt from South African Tax on their foreign earnings.
An amendment to the South Africa Income Tax Act No. 58 of 1962 is set to change this when it comes into effect in March 2020. These new tax rules will require South African expats who are still considered to be ‘physically present’ or ‘ordinarily resident’ in South Africa, while living and working abroad, to pay tax in South Africa on up to 45% of their gross foreign employment income if it exceeds R1 million per annum gross.
The majority of South Africans living abroad do not understand the implications of this new amendment, and how it will affect them.
The physical presence test
The physical presence test determines whether you, as a South African national, are tax resident based solely on how much time you spend in South Africa. If you are not considered tax resident based on the day count required, you will still need to be evaluated under the ordinary residence test.
The ordinary residence test
The ordinary residence test looks at your actions, connections and
intentions. Based on case law, ordinary residence may be regarded as: ‘the
country to which [an individual] would naturally and as a matter of course
return from his wanderings; as contrasted with other lands it might be called
his usual or principal residence and it would be described more aptly
than other countries as his real home’.
In other words, the purpose, nature and intention of an individual’s absence from South Africa must be established in order to determine whether the individual is still ordinarily resident there. It is, therefore, this test that most people are caught by.
How you can learn more
Join the South African Chamber of Commerce, in collaboration
with Orbis Investments UK, on 9 or 10
July 2019 to hear Professor Deborah
Tickle explain how the “expat tax” amendment could affect you if you
are working, or living permanently abroad.
Professor Tickle, an associate professor at the University
of Cape Town, will clarify the consequences of the new amendment for South
Africans not ordinarily resident in South Africa, but who may have assets in
the country, South Africans who have permanently left the country, and those
who have not settled their tax affairs and as such may also be subject to the
changes depending on their individual circumstances.
To find out about other
date options, contact email@example.com
Please note that above
discussion of tax matters is for information purposes only, and does not
constitute legal or tax advice. It is not intended or written to be used, and
cannot be used, for the purpose of avoiding tax penalties. Accordingly, any
individuals who are affected by the matters discussed above should seek advice
based on their own particular circumstances from an independent tax advisor.