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Expat Tax

As of 1 March 2020, South Africans working abroad will have to comply with the amended laws on expat tax. Amendments to the Income Tax Act includes the exemption of taxes up to the first R1 million per annum. Thereafter, South Africans are expected to pay taxes to the South African government. 

Initially, the 2017 Taxation Laws Amendment Bill, proposed that all expats’ income be taken into consideration and the exemption would be scraped altogether. This would mean that expats would be taxed on any and all compensation that they receive. As a result of the backlash from expats, and other concerned parties, including their foreign employers, the South African government felt the heat and reconsidered the proposed amendment. It was then decided that an exemption of R1 million per year would apply, as well as an extension for the amendment date. The amended taxation law is now effective from 1 March 2020. 

This means that come this Saturday, an expat with remuneration exceeding R1 million - even in the case where compensation is received in allowances and benefits such as education, housing, medical insurance, travel allowances, and the like, they will be taxed on their entire income as a South African who lives and works in South Africa.

Many experts share the opinion that the tax exemption is meant to bridge the gap between the number of expats and tax compliance in South Africa. It’s no secret that a vast number of skilled, working professionals leave the Motherland in search of better opportunities. According to the director of Enterprise Observatory of South Africa, Johannes Wessels, “for every one professional immigrating to South Africa, eight professionals are leaving our shores”. From the years 1989 to 2003, it is estimated that more than 520 000 South Africans emigrated, with the number growing by at least 9% every year.

Another reason for this amendment could be that the South African Revenue Service (Sars) is in a shortfall. By the end of the 2019 tax season, Sars had collected a whopping R14.6 billion less than had been predicted in the revised Budget. "It should be noted that these are preliminary results, which will be subject to detailed financial reconciliation and a final audit," Sars said in an official statement.

As a result, the apparent concern may be that South African expats may choose to consider their options in severing their ties with the country entirely. Their options are becoming increasingly limited and many may now be looking to cease their tax residency in South Africa or to financially emigrate to another state altogether. As much as these may be complicated and lengthy processes, many South African expats chose to live and work abroad due to the current economic situation and adding to the financial burden of South African citizens working abroad desperate measures.

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