The new amendments to the Income Tax Act are set to be in operation from 1 March 2020. The amendments put the focus on South African citizens working and living abroad. South African expatriates will now be exempted from paying tax on the first R1 million earned from abroad.
Labeled as the ‘Expat Tax’ in the financial industry as well as media, this announced in 2017 by the National Treasury and SARS.
Graeme Palmer who is a director in the commercial department of Garlicke & Bousfield explained that the exemption only applies if, during the same 12 month period, a person rendered services outside South Africa for a continuous period of at least 60 days.
He explained further that the exemption applies when a South African tax resident provides services outside South African on behalf of an employer for longer than 183 days during a period of 12 months.
Palmer emphasizes that is important to for expatriates to know and understand that the exemption will only apply to South African tax paying residents working outside South Africa – he further said, expatriates, he is referring to are ordinary South African citizens who have been physically present in the country ‘for a statutory specified number of days each year over a five year period’
‘Expatriates who have been living abroad for many years or who have emigrated are unlikely to be affected by this law. They will only pay tax in the country where they now live and are employed.‘
South African tax paying residents affected by the new law will not be liable for double taxation, and this can be eliminated by a tax treaty between the respective countries, explains palmer, if there isn’t a tax treaty there are provisions in the Income Tax Act which allow the person to apply for credit for the tax paid the foreign country.