Taxpayers who will be most affected by the legislation are those in the Middle East or in countries where there is no double taxation agreement.
As South Africans working outside the country prepare themselves for the new amendments to the Income Tax Act, set to come into effect from March 2020, many don’t know their tax status or what the changes will mean for them.
Dubbed the “Expat Tax”, the amendments mean that South African tax residents working abroad will be exempt from paying tax only on the first R1-million they earn abroad. Thereafter, they will be required to pay tax on their foreign earnings. There is still a lot of confusion about who will be required to pay the tax and whether the tax can be avoided through financial emigration.
The matter is complex and expats need to check their tax status as the new amendment specifically applies to an exemption allowed to South African tax residents.
The Double Taxation Agreements (DTAs) are internationally agreed pieces of legislation and South Africa holds these with various countries to define the taxing rights they have over expat taxpayers. The DTAs ensure that a taxpayer is not unfairly taxed in both South.