In March 2020, an amendment to the South African Income Tax Act 58 of 1962 (“Income Tax Act”) will be made, this amendment will have an extremely negative impact on South African residents permanently or temporarily residing and earning an income in a country other than South Africa (“Expats”). Expats should consider their position and options as income earners abroad, for possible options to limit the Expat tax they will be exposed to.

Currently, Expats who are outside of South Africa for more than 183 (one hundred and eighty-three) days, of which 60 (sixty) of those days are consecutive within a 12 (twelve) month period, receive an exemption from South African tax on their total foreign income in terms of section 10(1)(o)(ii) of the Income Tax Act.

This current position will change in March 2020, whereby Expats will be required to pay tax in South Africa of up to 45% (forty-five percent) on their foreign income, when it exceeds the threshold. The threshold is the first R1 000 000 (one million Rand) of foreign income in a 12 (twelve) month period. This threshold seems reasonable; however, it includes fringe benefits and allowances such as housing and transport and benefits such as flight costs. Once you take this into account the threshold becomes less generous.

Expats are urged to consider their current South African residency status and position in order to adequately prepare for the Income Tax Act amendment.

25 March 2019