Travel bans may still affect expats
RELIEF: EXEMPTION ON FOREIGN EMPLOYMENT INCOME Concern remains that the 66-day reduction on the 183 days is not sufficient.
South African expats who were stuck in the country during the Covid-19 hard lockdown may still be adversely affected, despite a relaxation in the number of days they have to be physically outside South African to qualify for the R1.25 million tax exemption on foreign employment income.
National Treasury and the South African Revenue Service (Sars) proposed that the 183 days be reduced to 117 to compensate for the Level 5 and Level 4 lockdowns in South Africa, when they could not leave the country.
However, industry players noted that this amendment may not be sufficient because even if they could leave SA there were still other international travel bans.
Submissions to Treasury
Both the South African Institute of Tax Professionals (Sait) and the South African Institute of Chartered Accountants (Saica) made submissions to Treasury raising their concerns about potential adverse tax consequences for taxpayers despite the change.
The industry bodies noted the fact that they were not offered the opportunity to comment earlier on the change, as it was not included in the draft Taxation Laws Amendment Bill, nor was it part of the original tranche of Covid-19 tax relief. Their concerns forced them to make the submissions outside of the normal legislative process.
The Sait personal income and employment tax work group says in its submission that foreign-sourced employment income earned between March 1, 2020 and February 28, 2021 and beyond would ordinarily have been tax exempt.
“However, as a result of the various lockdown regulations, the same foreign-sourced employment income would not be exempt due to the inability to meet the 183-day requirement.”
‘Complicated’
Sait adds that the premise on which the calculation is based (the 66 days) is that South African tax residents were prevented from leaving SA to take up employment abroad during lockdown Levels 5 and 4. However, the SA lockdown was “complicated”, and continues to be, by travel bans that were implemented worldwide.
“These foreign country lockdowns or travel bans resulted in many individuals being unable to leave or enter SA to perform their duties in the country of residence; in the country where they were assigned; or in the country where their employer is incorporated.”
David Warneke, chair of Saica’s national tax committee, says in its submission that although it appreciates the late relaxation of the number of days rule, the concern remains that the 66-day reduction on the 183 days is not sufficient.
It was not easy for many individuals to leave SA
Limited flights
“It was not that easy [or affordable] for many individuals to leave SA during the Level 3 lockdown, as there were a restricted number of fl ights during that time.”
He added that even if people were able to leave SA, they were unable to enter the countries where they were working due to travel bans imposed in those countries.
Both Saica and Sait referred to travel restrictions in Italy, Mexico, and Saudi Arabia, and some Chinese employers requesting South Africans not to return from their annual Christmas holidays in January.