SA ‘Expat Tax’ Answers to FAQ South Africans Working Abroad Need to Know

By Nicolas Botha

As March 2020 approaches, when SA ‘Expat Tax’ is due to be implemented, we’ve been inundated with questions from South Africans working abroad. Here are some of the latest questions from SAPeople followers around the world, with answers kindly provided by the expert tax team at Tax Consulting South Africa. 

SA Expat Tax

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.

Below you will find a selection of the latest questions submitted with answers by Nicolas Botha from Tax Consulting SA.


There are two generic items which are critical for good order and to avoid repetition – see Preamble here:

  1. Legal Privilege, Confidentiality and Liability
When we operate in our practice, our advice comes with legal privilege (as admitted attorneys, which are the only tax advisors given such privilege under the Tax Administration Act), confidentiality as per our professional association rules (we are bound by the rules of various professional bodies including law society, SAICA, SAIBA, SAIPA, FSB (now FSCA), SAIT, FPI, SARA and SAPA etc.), and we also accept liability for our professional guidance where explicitly required by clients and stated as such. As this is general guidance given on limited facts, we note that these rules do not apply to the responses we provide.
  1. Tax and Exchange Control Law
There are some fundamental rules of tax and exchange control, which applies to all South African residents or persons otherwise with a South African source of income. No response is proper where these rules are not referenced. Hence, we noted below some of the most general items applicable to all questions, thus avoiding repetition and ensuring everyone has access to the same tax technical information -
  • 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

Conclusion

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 claudia@taxconsulting.co.za.

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Frequently Asked Questions (FAQ) about South Africa’s ‘Expat Tax’

Dear Glen, Please see our initial introduction page for information on financial emigration, the dual taxation agreement as well as our two tax residency tests.
  • In order to mitigate the risk around your tax residency in SA it is still advisable to formalise your residency with SARS and SARB. This is best done through the financial emigration process.
  • As you have no remaining assets it will then be advisable to deregister your tax number in SA, once this is complete you will no longer have an obligation to file any tax returns and your tax affairs in SA will be closed.
Dear Madelein, Please see our initial introduction page for information on financial emigration, the dual taxation agreement as well as our two tax residency tests.
  • It is likely that you are considered a tax resident in SA if you have been living and working in SA, please refer to our introduction page for the two residency tests for further guidance hereon.
  • If you are considered tax resident and are moving permanently to the USA, it will be best to formally cease tax residency in SA to ensure your income abroad is protected and no longer subject to tax in SA. This is best done through the financial emigration process as it encompasses all aspects of the formalisation.
  • Once this process has been completed you will still be able to retain your policies, annuities and bank account within SA – there is no obligation to close your accounts or encash/cancel these policies.
Dear Alexa, Please see our initial introduction page for information on financial emigration, the dual taxation agreement as well as our two tax residency tests.
  • Kindly note that your citizenship does not determine your tax residency, South Africa’s tax residency is outlined by our two tax residency tests, as outlined in our introduction page. Thus, there is no need or benefit to renouncing SA citizenship.
  • Based on the above outlined situation there appears no claim to be a South African tax resident, due to the period spent outside SA and having no remaining assets in SA.
  • However, as you lived in SA for a period that would qualify you as tax resident it will still be safest and mitigate the most risk around your residency to formally cease tax residency in SA to ensure you are fully covered. This is best done through the financial emigration process.
Dear Collette, Please see our initial introduction page for information on financial emigration, the dual taxation agreement as well as our two tax residency tests.
  • Based on the above you will not meet SA’s tax residency test and therefore will not be seen as tax resident of SA.
  • In addition to this you already have a non-resident account, which shows the South African Reserve Bank has noted you as non-resident for exchange control purposes. Therefore, correlating with your non-tax residence claim.
  • However, as you are still receiving South African sourced income, from the pension fund, it will be advisable to register for tax and declare this income accordingly to ensure the utmost compliance.
Dear Dewald, Please see our initial introduction page for information on financial emigration, the dual taxation agreement as well as our two tax residency tests.
  • As per the Income Tax Act (ITA) of South Africa, all fringe benefits are taxable.
  • Thus, when calculating your liability in SA any benefits, such as housing allowances; medical aid contributions; travel allowances etc. to which your employer contributed, will be included in determining your tax liability.
Dear Mickey, Please see our initial introduction page for information on financial emigration, the dual taxation agreement as well as our two tax residency tests.
  • In order to determine whether you are liable to pay tax in SA on foreign earnings in the UK, you will need to determine if you are tax resident of SA. This is outlined by our two tax residency tests. Kindly refer to our introduction page for more information hereon.
  • Should it be determined that you are tax resident of SA, which will likely be the case as you intend to return to SA, you will be required to declare all foreign earnings within SA and pay any associated taxes thereon.
  • SA does, however, provide tax relief on your foreign employment income through section 10(1)(o)(ii) of the ITA. Thus, if you meet the requirements of the exemption, the income earned will be fully exempt.
  • Unfortunately, the section 10(1)(o)(ii) exemption has been amended, which comes into play from March 2020, to only exempt the first R1 million thus income earned in surplus of this million will be taxable in SA.
Dear JD, Please see our initial introduction page for information on financial emigration, the dual taxation agreement as well as our two tax residency tests.
  • Should you still be considered tax resident of SA you will need to declare this income in SA and use the section 10(1)(o)(ii) exemption to reduce your tax liability.
  • This is taxed on an individual bases and therefore will not look into your combined income with your spouse but rather only yours. Thus, come March 2020, only the employment income earned in surplus of R1 million will be taxable.
  • Please note that your will need to meet the exemption requirements to claim this and this exemption only applies to employment income abroad – not other forms of income such as those earned from investments abroad.

If you have any SA  ‘expat tax’ questions pertinent to your situation, write to us – anonymously if you prefer – at admin@sapeople.com, or write directly to nicolas@taxconsulting.co.za.