Earn most of your money offshore? You may be facing some ‘ex-pat tax’ changes

Tax Consulting SA’s Nicolas Botha explains the coming changes to tax exemptions on money earned overseas.

Are you are a South African who earns the bulk of their money abroad?

Currently, a South African tax resident who is an employee and renders services outside the country on behalf of an employer (South African or foreign) for longer than 183 full days in any 12-month period (With 60 consistent days out of the country) can be granted an exemption on their income tax.

But the new rules will give you a break on only the first, R1 million you earn abroad. Thereafter you can be taxed according to South Africa’s own income tax system.

Tax consultant Nicolas Botha talks to Refilwe Moloto about the impending changes that may see the exemption falling away.

South African ex-pats were able to claim Section 10 102 exemption – that’s the 183 60-day rule.

Nicolas Botha, Senior Financial Emigration Specialist -Tax Consulting SA

In the past that has allowed you to fully exempt your income he explains.

What’s happened now is that that has been amended to only allow for exemption of the first million rand. The surplus after the one million rand thereafter will then be taxable according to South Africa’s normal tax brackets which places a lot of ex-pats in a predicament.

Nicolas Botha, Senior Financial Emigration Specialist -Tax Consulting SA

Why is this change being implemented?

Botha says Treasury cross-referenced SA ex-pats and immigration statistics and compared it with tax compliance returns.

What Treasury noticed was there was a vast difference between the two…so it was almost a bit of a scare tactic to wake up South Africans and get compliant.

Nicolas Botha, Senior Financial Emigration Specialist -Tax Consulting SA

Make sure you are tax compliant, he advises, adding South Africans who are living overseas permanently would not be affected by double taxation.