Thanks to popular demand, here are even more ‘Expat Tax’ questions submitted by SAPeople members, with answers kindly provided by the expert tax team at Tax Consulting South Africa.
Dear SAPeople Members,
The positive responsive from the community has been phenomenal. We encourage you to continue submitting your questions and look forward to those unique situations and/or high net worth cases, where the answer and optimally compliant position are more complex.
Here you will find a selection of the latest questions submitted and answers by Claudia Aires and Jonty Leon from Tax Consulting SA.
- Legal Privilege, Confidentiality and Liability
- Tax and Exchange Control Law
- Before one can decide on how to proceed, one needs to determine if they are a tax resident of South Africa by applying our two tax residency tests, being the Ordinarily Resident test and the Physical Presence test. You can also be non-resident somewhere else, but this is more complex process and will need specific guidance on a case-by-case basis.
- If one is a tax resident of South Africa, then they will be liable for tax on their worldwide income and the amended expat exemption will apply. If one is a non-tax resident of South Africa, they will be taxable only on South African sourced income. Thus, it is imperative that these tests are applied correctly, and a determination is made.
Both of the above-mentioned tests are set out in the links below for your ease of reference:
2.1 Ordinarily resident test - click here
2.2 Physical presence test - click here
We have also set out further information below, which will assist in understanding the pros and cons of the solutions you have in regard to tax residency and the amended expat exemption.
Expat tax compliance brochure: Click here
Article on Expat tax law: Changes to law for South Africans working abroad
We will refer to these sources in each response and please just let us know if you need more personalised attention. There is always someone willing to have a call with you to assist and there are no hidden cost implications. Also, we really enjoy unique situations and/or high net worth cases, where the answer and optimally compliant position are more complex.
For more information, please contact Claudia Apicella, Head of Expatriate Tax Compliance at email@example.com.
Questions and Answers about South Africa’s ‘Expat Tax’
1. From Lytjie: My husband has been working in the US 6-7 months of a year, he has a bank account in SA and when he comes home he does not work here, his main source of income is US, he pays tax there and I am also registered for tax there to give him some tax relief. I stay here fulltime and work here. We are starting the process of becoming permanent US citizens. What are the current tax implications for him, and do we need to worry about the Xpat tax law?
2. From Nicolaas: I am an airline pilot based in Hong Kong. I noticed in article 14.3 of the SA/HK DTA that it says something about any remuneration earned by operating an aircraft in international airspace will only be taxed in the country of the operator. Can this provision save me from having to pay tax in SA? My salary consists of about 90% basic pay, housing, etc and only 10% of it is from actual flying duty. Will SARS know how and what I’m paid for?
3. From Markus B: We (family of 5) have been in Australia now since 2006. Citizens since 2012.My wife and I lost SA citizenship due to not applying to keep in time when we became AUS citizens. Our 3 kids are dual citizens and passports are current. We have a bank account in SA which we use to support family in SA. We top up the account twice yearly to keep this going. Give and take R7500.00 a month is used from the account as gifts to family including payment of mobile phone contracts and policies not in our names. Are we affected and what would be the right thing to do if we are affected?
5. From Dirk G: I work in the USA for 7 months a year for the last 3 years and have filed my tax returns every year. I have been tax exempt in SA due to the time periods I spend in the US. This year I will go back to the US for 5 months or until I receive my work permit for Canada and then come back to South Africa briefly to gather my belongings and then leave for Canada for a minimum of 2 years. My question is, will I still be tax exempt as I will be out of the country for more than 183 days of the year although between two countries. My salary is less than R1 million a year.
6. From Frans K: My situation: Before I emigrated to Australia in May 2010, I spent some time with the Benoni tax office to make sure all is in order. At this time I was advised by an officer to contact the expatriates unit once I was registered with the Australian Tax Office (ATO), which I duly did. This from the Expatriates Unit on 28 December 2011: “Have you emigrated? If yes then you need to complete the emigration form and your tax number will be de-registered.” Clearly, de-registration was a valid and legal condition at that time, else SARS would have acted to rescind the de-registration. It seems the expats unit no longer exists. The de-registration was eventually achieved in December 2012 through the good offices of a very helpful gentleman at the Alberton SARS office, at which time I was advised by this gentleman that in future I would not need to complete tax returns, nor would PAYE be applied to any South African pension or annuity paid into my blocked account. . Our pension administrators followed this ruling for the following two tax years, but began to withhold PAYE in March 2016, and no amount of begging for the past three years could elicit any reason for the change. Their administrations and customer relations are lamentable. Unfortunately, SARS “contact central" phone service advised that they cannot deal with this enquiry, I must email SARS. After two months the response from them was they could not deal with this enquiry, I should phone “contact central"! (I regret to advise that your query may not be addressed via this channel.) Brick wall! I have dual citizenship, receiving my Australian citizenship in March 2017. The following are the questions that I have: Why was SARS insistent that I de-register when I left South Africa? It was not my instigation. They must have had a good reason. Why did our pension administrators not apply PAYE for the tax years 2014-15 and 2015-16? No tax directives were issued for this period. Where are the funds held that have been kept back by our pension administrators for PAYE? As my SARS tax file is closed and de-registered, no funds can be allocated to my SARS file/account, the balance is zero. A certificate of residency for tax purposes from ATO was submitted to our pension administrators. I include article 18 part one from the Dual Tax Agreement between South Africa and Australia below. I’m hoping you can throw some light on this mystery. Subject to the provisions of paragraph 2 of Article 19, pensions and annuities from sources in one Contracting State and paid to a resident of the other Contracting State shall be exempt from tax in the first mentioned Contracting State to the extent that such pensions and annuities are included in taxable income in the other State.
Thank you for your detailed note. It seems you have been given the run around by SARS, which is not unusual at all, unfortunately. I agree with your view of the DTA, that the pension should not be withholding tax as this tax would be payable abroad, and not in SA. My view is that an investigation into your tax number needs to be done, because it very well may still be active, and if it is not, then I suggest that it be reactivated and that a tax directive be applied for, for the past years as well as future years, so that the pension fund does not continue to withhold tax.
As your matter is not the usual, my suggestion is that we have a consultation to discuss this in detail, so that we can untangle all issues and work on a solution.
8. From Theunis F: Hi I live in South Africa but work in Kazakhstan. I do my tax breaks as per SARS every year my income is 2.4 mil a year. My salary is paid into an FNB Channel Islands account which is not part of the agreement of tax es between the specific countries. Can I then transfer 1 million from this account into my FNB South African account tax free and leave the res in my overseas account? Will I be taxed on the money that I leave abroad? Can I also take out the tax-free annuity I think is 365 000 per annum on top of the million will that also be tax free?
If you have any SA ‘expat tax’ questions pertinent to your situation, write to us – anonymously if you prefer – at firstname.lastname@example.org, or write directly to email@example.com or firstname.lastname@example.org.