20 July 2017: The South African Revenue Service has published its proposed amendment to tax the income of South Africans working overseas. If this amendment to the foreign employment income exemption is passed, it may come into effect in 2019.
Tertius Troost, Tax Consultant at Mazars says that the proposed amendment will affect most South African tax resident employees working abroad. “This has been a contentious issue since its announcement earlier this year. It will impact the decisions South Africans who work overseas to raise funds, as well as employees being seconded to work overseas for a period of six months.”
Troost explains that currently, if a South African resident for tax purposes works in a foreign country for more than 183 days per annum, as well as meeting other criteria, the income earned from employment in that country during this period, will be exempt from tax in South Africa.
“In the 2017 Budget Speech, the minister of finance, Minister Pravin Gordhan, however proposed that the current exemption should be amended to only be applicable where income earned for services rendered in another country was subjected to tax in that particular jurisdiction,” adds Troost.
Troost says that the proposed repeal of this section will result in all South African tax residents being subject to tax on foreign employment income earned in respect of services rendered outside South Africa with relief provided from the foreign taxes paid in the form of a rebate. “This proposed amendment will most definitely negatively affect South African tax resident employees working in low tax or tax free jurisdictions,” comments Troost.
“Treasury has suggested that the amendment should come into effect on 1 March 2019. However, the amendment is still open to public comment, and we expect to see a lot of public reaction before the deadline,” Troost concludes.
Mazars is an international, integrated and independent organisation, specialising in audit, accounting, tax and advisory services across a range of markets and sectors. In South Africa, Mazars employs over 1000 staff in 12 offices nationally. With the skills of 18 000 staff operating in 79 countries, Mazars is large enough to service international listed clients, yet small enough to assist small companies grow and prosper in their own environments. Mazars is present on six continents and represented in 26 African countries.