Thousands of South Africans leave the country each year to earn a better wage, enticed by the favorable remuneration packages being offered.
Low tax rates or tax-free jurisdictions such as Dubai in the Middle East are strong magnets for South Africans where despite harsh conditions, long working hours and separation from their families, they are usually guaranteed to earn a wage far more than what is possible in South Africa.
What was revealed at this year’s budget speech may come as a shock if you are an expat working abroad as there are plans for legislature changes that will dramatically affect your earnings.
Currently there is something called the 183 day rule. This rule is linked to services rendered outside the borders of South Africa on behalf of an employer, by either a tax resident or non-resident. The rule states that if you spend a total of 61 continuous days and an aggregate of 184 days outside of South Africa in any twelve-month period, you are potentially exempt from paying tax in South Africa on remuneration derived from those services.
If you are currently spending more than 183 days outside South Africa, you most likely should be paying tax to the country where you are rendering those services unless it is a tax-free environment such as Dubai. Currently employers can elect not to pay tax if their employees are rendering services in zero tax countries. However, with the proposed changes, they no longer will have that benefit and will be required to pay tax in South Africa.
This new proposed legislation was created to avoid any situations of double non taxation where no tax is paid in between where the services are rendered and South Africa. It states that in cases where no tax is paid in the country where you render your services, it is necessary for tax to be paid in South Africa.
With the proposed legislation, even if you are working outside of South Africa for the full 12 months of the year but don’t pay tax there, you will be required to pay tax in South Africa.
These changes are still being debated and we won’t likely see these implemented until 2019.
At Dirmeik Consulting, we offer a professional tax consulting service and have many expat clients who we advise and assist with their tax. Should you be working offshore or require tax advice, contact us on:
Cape Town: 021 421 4444,
Johannesburg: 010 007 3026,
Durban: 031 007 0881