South African Tax Law currently stipulates that if a South African resident works outside the Republic for more than 183 full days (in aggregate) in any 12 month period and for a continuous period exceeding 60 full days during that 12 month period, the foreign employment income earned is exempt from income tax within the Republic irrespective of whether the resident pays any income tax in the foreign country.
National Treasury recently proposed changing this law and doing away with the exemption in its entirety. However in response to the more than 1 300 objections received, Treasury has agreed to amend its original proposal to scrap the 183-day exemption on foreign employment income. Treasury will retain the exemption and introduce a R1 Million ceiling.
In terms of the amended proposal, the first R1 Million of foreign employment income earned will be exempt “if the individual is outside the Republic for more than 183 days as well as for a continuous period of longer than 60 days during a 12 month period.” Foreign employment income earned over and above the R1 Million will be taxed at the individual’s South African marginal tax rates.
Implementation has also been postponed from 1 March 2019 to 1 March 2020 in order to allow South Africans working abroad more time to either adjust their employment contracts or their circumstances to formalise their tax status.
Finance Minister, Malusi Gigaba, still has to approve the proposed amendments which were presented by Treasury officials to Parliament’s standing committee on finance, on Thursday 14 September 2017, in response to the public comment and the objections received regarding the adverse effect the previous proposal would have had, especially for those earning relatively low income.
Trainee Accountant, Durban