The implications of proposed tax law amendments for 2017 – published this week by the National Treasury – have confused and concerned many South Africans working abroad. Jerry Botha, Managing Partner of Tax Consulting, has kindly answered several queries sent to SAPeople:
1. SAPeople follower: Is it true that SARS is in the process of adjusting legislation proposals to have all expats taxed? Or at least to tax all expats according to South African tax laws, and rebates can be claimed for taxes paid in resident countries? And that this will possibly come into effect in March 2019?
Jerry Botha: There is a proposal by National Treasury to tax all South African residents. Non-residents are not affected. The term expatriate is loosely used to define both residents and non-residents, so members should please only talk about tax resident or non-tax resident. A legislative process will now be followed, starting with commentary hereon (of course we will comment), the Parliamentary hearings, etc. We will know if this is true earliest November 2017, but in all likelihood only January 2018 or February 2018.
2. How is SARS going to find you in another country? It’s not like you leave a forwarding address for them…
Good tax planning certainly does not hinge on the concept of not being found. Generally we do not prefer to respond to questions like this, as tax fraud is part of our law and recommend that members should think along the lines of not getting caught. I guess the jails are full and most sitting there would acknowledge this was not part of the plan.
3. Is it true that current law already states you have to disclose your overseas earning but apply for an exemption when filing? And that the exemption was always given if you were outside the country for the stipulated period?
This is mostly correct. The exemption is only given on employment income, not other classes of income. That is why independent contractor income is such a bad thing, tax wise, for expatriates. Other classes of income not exempt are interest, dividends, rental income etc.
4. Is it true that all that will happen in future is that you will now have to file showing any off shore revenue and taxes paid?
As a South African tax resident you had to always do this. The change now is this will become taxable and only credits for foreign taxes paid. The point is incorrect in as far as where RSA taxes are higher than offshore taxes, you would now need to pay the difference.
5. Is it true this has been proposed for a number of years already – it is only a matter of time before it is written into law?
The Budget Speech 22 February 2017 was the first notice hereon and that was completely different to what is being noted now.
6. I just wonder how this will work for people working on the cruise ships? Will they also be required to pay tax now even though they earn money on international waters?
The laws hereon is not proposed to be changed, however, you must be part of the “passage” of the ship. Otherwise, you are impacted.
7. From what I understand the new law refers to SA residents earning foreign income. Not SA citizens residing abroad. Please correct me if I’ve misunderstood.
Very correct and perhaps the best point made. Being a citizen and a tax resident should not be confused. Tax residents can include citizens and non-citizens. The most pertinent questions to ask, if you want to do a quick self-assessment, is (a) did you do a deemed CGT disposal when you left South Africa and disclose this to SARS, (b) did you financially emigrate through the Reserve Bank? Where not, you need to have a look at your situation.
8. Is this correct – this is not for SA people living abroad, but people living in SA and doing the more than half a year outside SA work thing?
Where you have an intention to return to South Africa, your family resides in South Africa or you come home every holiday, you are generally considered tax resident. It will be good to read the SARS Interpretation Note 3 hereon, as this explains a part of the tax residency test very well.
9. If you have officially emigrated, then this law does not apply as far as I can tell – correct?
I agree with this this statement. (See links below.)
10. MORE IMPORTANT TAX INFO and LINKS FOR SOUTH AFRICANS ABROAD
- SARS to Exchange Tax Information with over 50 Jurisdictions
- Tax Residency and Retirement Annuity considerations for Expatriates
- Sayonara to Tax-Free Earnings
- New Tax Laws set to bring plenty of South Africans abroad back home… or to emigrate formally
For more detailed answers and advice, please contact Tax Consulting South Africa:
Watch Jerry Botha’s interview with Business Day TV today, 21 July 2017, on the proposed changes on exemption on foreign employment income. The interview will be broadcast at 19h20, 20h20 and 21h20 on DSTV channel 412.