Are you a South African tax resident? Do you spend some time working abroad?
If the answer to these questions is yes, then you need to be aware of the tax changes coming into effect from 1 March 2020.
Currently, any South African tax residents working abroad are exempt from paying tax on any amount of foreign remuneration that they receive. In order to qualify for this tax exemption you must have been working outside of South Africa for a period of 183 days in a 12 month period. 60 of those 183 days must also have been consecutive.
From 1 March 2020, this will no longer be the case.
Changes made to the Income Tax Act of South Africa mean that only the first R1 million of your remuneration will be exempt from tax. Any remuneration earned above R1 million will be taxed. This also means it is possible that your remuneration will be taxable in South Africa and in the foreign country where you are working.
This change has led to may South African tax residents working abroad to seek financial emigration from South Africa. Financial emigration is a formal process with the South African Reserve Bank (SARB) to change a person’s tax status from “resident” to “non-resident”.
It is vitally important that you get in touch with a qualified tax practitioner to understand the impact that these changes will have on your tax position and plan accordingly. The tax practitioner will also be able to advise you if you are still considered a South African tax resident in terms of the physical presence test that is applied by SARS.