Change in Law Affecting South African Tax Residents Working Abroad

By Graeme Saggers, Nolands

Like many other developing countries, it is common for South Africans to seek employment outside the country’s borders in more developed economies. There are South African expatriate communities in most countries around the world. As from 01 March 2020, a well-known law governing how South African expatriates are taxed will undergo a significant amendment.

Previously, any South African tax residents were not taxed on their employment income earned in respect of services rendered abroad provided they were outside the country for more than 183 days in a 12-month period, of which at least 60 days are continuous. This exemption has been amended to only exempt the first ZAR 1 million (approximately EUR 62,000) of employment income, which includes fringe benefits such as accommodation, schooling, transport etc. South Africa does not have the concept of domicile in their tax law and residency is assessed on either an ordinary residence or physical presence basis. If a taxpayer breaks residency, there is a deemed disposal, subject to capital gains tax, on their worldwide assets, excluding South African property and retirement assets. As the law amendment only affects South African tax residents, it has resulted in many South African citizens seeking advice on residency concepts and the application of double taxation agreements. As South Africa has a wide tax treaty network, it is common for taxpayers to automatically break residency through the application of the tie-breaker tests.

Whilst these people will then not be affected by the law change, they may incur a capital gains tax liability as a result of the deemed disposal event. The law amendment has created much consternation amongst South Africans living abroad and all would be well advised to seek advice from both their local tax advisor and a South Africa tax advisor in order to clarify their tax obligations.

Graeme Saggers

Graeme Saggers

GGI member firm
Advisory, Auditing & Accounting, Fiduciary & Estate Planning, Tax
More than 10 offices throughout Africa
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Nolands is an international auditing firm located in 11 offices in all major centres in Africa. Nolands employs almost 200 people and focuses on providing the best possible solutions for its clients. The company prides itself on being “not ordinary” and on its ability to integrate services and respond rapidly to clients’ needs.

Graeme Saggers is the Tax Director for Nolands. He holds a BCom (Hons) degree from Rhodes University and an MCom (Tax) degree from the University of Cape Town. Graeme qualified as a chartered accountant in 2009 after completing his articles at KPMG. He joined Nolands in 2011 as an audit manager and was appointed as a tax partner at Nolands in September 2014. Graeme is Regional Chairperson Middle East Africa of GGI’s ITPG.

Published: International Taxation Newsletter, No. 12, Spring 2020 l Photo: straystone -

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