Relief, concern about new expat tax proposal
Stakeholders have welcomed National Treasury’s relatively softer stance on expat tax, but there are concerns about the onerous process of claiming tax credits and the significant cost implications for some employers.
Treasury previously proposed that an SA tax resident working abroad for over 183 days a year (of which 60 days were continuous) would in future be fully taxed in SA and only be eligible for a tax credit to the extent that tax was paid offshore. This could have had significant tax implications for some South Africans working abroad, particularly those in low- or no-tax jurisdictions.
Treasury confirmed in Parliament that the proposal would be changed to allow the first R1 million of foreign remuneration to be exempt from tax in SA.
“Normal middle-income earners, such as teachers, waiters and artisans, working abroad should then normally be able to continue to live and work overseas without paying South African tax,” says Bowman’s Patricia Williams.
Tarryn Atkinson of FirstRand Group says in future it’ll cost a lot more for employers wanting to ensure their employees in a foreign country aren’t worse off.
“It also then creates almost a barrier for people wanting to invest in SA when they realise how high the employment costs are going to be should you be sending any of your employees outward from SA.”
Atkinson says SA hasn’t had a large take-up of the headquarter company regime; the proposed amendments could deter interested parties.
There are also concerns about the onerous tax credit system – currently already used by taxpayers on shortterm assignments – and that a delay in claiming tax credits could effectively lead to double taxation.It takes up to two years to get the credits allowed, says Beatrie Gouws at KPMG.
Offshore jurisdictions do not have the same tax year as SA and taxpayers may not have a tax certificate from a revenue authority to prove a certain amount of tax was paid. There are also concerns the R1-million threshold may be too low.