South Africa’s ex­pat tax di­luted af­ter pres­sure pays off

The Star (St. Lucia) - - BUSINESS - By Gary Robin­son

South Africa’s Na­tional Trea­sury has re­acted to pres­sure from ex­pats all over the world, over its plans to scrap a tax ex­emp­tion on over­seas earn­ings and an­nounced that a taxfree al­lowance of ZAR1m (£57,143, US$76,003) is to be in­tro­duced.

The changes were an­nounced in Cape Town with plans to amend cer­tain as­pects of the draft Tax­a­tion Laws Amend­ment Bill com­ing af­ter tax­pay­ers liv­ing abroad ex­plained the new law would “have a se­verely neg­a­tive” fi­nan­cial im­pact on their lives.

The South African Na­tional Trea­sury said that it still plans to re­peal a law that al­lows a tax ex­emp­tion on in­come earned by South Africans work­ing over­seas. Two bills, the 2017 Tax­a­tion Laws Amend­ment Bill and the 2017 Draft Tax Ad­min­is­tra­tion Laws Amend­ment Bill, give ef­fect to tax pro­pos­als an­nounced on Fe­bru­ary 22 by for­mer fi­nance min­is­ter Pravin Gord­han at the 2017 Na­tional Bud­get.

If planned new leg­is­la­tion is ac­cepted by South Africa’s par­lia­ment, South Africans who work over­seas could be taxed lo­cally for for­eign earn­ings from March 1 2019.

How­ever, yes­ter­day’s joint re­port by the Na­tional Trea­sury and South Africa Rev­enue Ser­vice (SARS) ac­cepted that for those on “rel­a­tively lower in­comes” an amend­ment had to be made.

The amend­ment fol­lows on, as re­ported, from a public con­sul­ta­tion on the changes that closed on 18 Au­gust.

Ad­dress­ing its par­lia­ment the Na­tional Trea­sury pre­sented its re­sponses to public com­ments it re­ceived dur­ing the public par­tic­i­pa­tion process.

It said that it had re­ceived 1,308 writ­ten com­ments to its draft bills, 760 which com­mented on the fi­nan­cial im­pact of the leg­is­la­tion, with most of the com­ments com­ing from res­i­dents liv­ing in the Mid­dle East.

Sum­maris­ing the com­ments, the Na­tional Trea­sury said: “The tax will have a se­verely neg­a­tive im­pact on fi­nances and remit­tances to South Africa, es­pe­cially for those on rel­a­tively lower in­comes.

“This in­cludes amounts re­mit­ted to fam­ily mem­bers to fund liv­ing costs in South Africa, in­vest­ment in for­eign in­come in some fam­ily run busi­nesses and money spent in South Africa dur­ing vis­its.”

The prosed changes will now see the first ZAR1m of for­eign re­mu­ner­a­tion to be ex­empt from tax in South Africa if the in­di­vid­ual is out­side of the coun­try for more than 183 days as well as for a con­tin­u­ous pe­riod of longer than 60 days dur­ing a 12-month pe­riod.

“The ex­emp­tion thresh­old should re­duce the im­pact of the amend­ment for lower to mid­dle class South African tax res­i­dents who are earn­ing re­mu­ner­a­tion abroad,” the Na­tional Trea­sury said.

“The ef­fect of the ex­emp­tion will also be that South African tax res­i­dents in high in­come tax coun­tries are un­likely to be re­quired to pay any ad­di­tional top up pay­ments to SARS.”

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