Treasury aims for a ‘win-win’

THOSE AWAY FOR A CONTINUOUS PERIOD WILL QUALIFY Vast noncompliance by many expatriates abroad noted by Treasury and Sars.

National Treasury confirmed in parliament yesterday that the law change forcing South African expatriates to start paying tax will be proceeded with and take effect.

But the outcome is vastly more beneficial than that originally proposed by Treasury. Barry Pretorius’ Expatriate Petition Group can certainly lay claim to having shaped these laws, including negotiating a generous R1 million tax exemption per year for expatriates.

Standing committee of finance chairperson Yunus Carrim and the Treasury team, led by Christopher Axelson, undertook a genuine consultative process.

The proposal will be changed to allow the first R1 million of foreign remuneration to be exempt from tax in SA if the individual is outside the Republic for over 183 days, as well as for a continuous period of longer than 60 days in a 12-month period. The exemption threshold should reduce the impact of the amendment for lower- to middle-class SA tax residents who earn remuneration abroad. Due to the exemption, SA tax residents in high-income tax countries are unlikely to be required to pay Sars any additional top-up payments.

To allow greater time for individuals to adjust their contracts or circumstances and to finalise/formalise their tax status, it has proposed the effective date for this proposal be extended to March 1, 2020.

An Expatriate Petition Group participant survey, shared by TaxConsulting with Treasury, indicates that at least 60% of South Africans abroad won’t be paying any taxes on their employment income. They’ll remain taxable in SA on interest, dividends, rental income and capital gains. On these other classes of income and not gains, not linked to employment, the tax law has always been clear: these must be disclosed to Sars and taxed in SA.

The vast noncompliance by many expatriates abroad has been noted by Treasury and Sars. Many expatriates have left and not considered it necessary to submit tax returns in SA, submitted zero tax returns to Sars, or even indicated to Sars that they’re unemployed, while actually earning employment income outside. These expatriates are at risk and the very clear message from Treasury and Sars is that they must get their affairs in order.

Also, many South Africans have simply left without formalising their affairs with Sars or the SA Reserve Bank. Treasury’s cautioning them to do the correct thing.

“The formalisation of the tax residency status of South African tax residents who left the country many years ago is to be encouraged.”

Jerry Botha is managing partner at Tax Consulting SA