Since 2001, residents
(called 'ordinarily resident') are taxed on their world-wide
income, but non-resident persons continue to be taxed
only on their South African source income.
'Ordinary residence' is
not defined in the law, but has been described as involving
some continuity of residence, or as being the place
where a person's belongings are stored, and to which
he means to return.
on assignment are normally classified as 'temporarily
resident', which is equivalent to non-resident from
a tax perspective, although there might come a point
at which this could be challenged if roots start to
go down too deeply. For instance, after three years
immigrants are brought within South African exchange
control laws, although they can leave with their assets
intact for another two years after that.
Foreign nationals entering
South Africa need to make a declaration of their foreign
assets, and undertake that these will not be made available
to residents of South Africa during their stay.
There is no requirement
for temporary residents to remit earnings from foreign
assets to South Africa, and they may make 'reasonable'
transfers home from monies earned in South Africa.
On departure, an expatriate
may take away his savings, but needs to confirm that
he has not emigrated from South Africa before.
South African-source (taxed)
income includes earnings from employment, remuneration
for services rendered in South Africa, rent from property
assets located in South Africa, and interest from loans
applied or used in South Africa. Dividends however are
not taxed in the hands of a South African natural person.
is quite well-developed in South Africa, and an ordinarily-resident
individual will find it quite hard to develop foreign
companies or trusts to defer tax; however, this will
not affect expatriates as long as they retain temporary
consequences of becoming resident are very negative
for an expatriate, especially since the introduction
of capital gains tax in 2001. Any growth in capital
assets will be taxed over the period in which an expat
is regarded as resident in the country, even if the
assets are located overseas and they remain unsold.
becoming tax resident, the expatriate is given a tax
base for capital gains tax equal to the market value
of his assets. This exempts the accrued gain up to that
point, but when he ceases to be a resident when his
tour of duty is complete, he is treated as having sold
his assets at their market value.
NB: South African tax
rules are considerably more complicated than the above
simplified summary, and professional advice on the situation
of any particular individual is a necessity.
It is clear from the above
that an expatriate working in or from South Africa is
in a good position to acquire and maintain offshore
assets, as long as temporary residence status is maintained,
and as long as income from them is not remitted to South
Depending on the personal
situation of a given individual (or his employer), it
may be worth investigating a base in Mauritius from
which services can be supplied to South Africa in a
March, 2005, the South African Revenue Service (SARS)
published a guide to taxation for foreign residents
of South Africa, in order to help clarify the tax position
of expatriate workers following the switch from a source-based
tax system to a residence-based regime in 2002.
the 'physical presence' test used to determine liability
for South African taxes, those who are resident in the
country for more than 549 days in a three-year (subsequently
increased, see below) period will be taxed on their
worldwide income. They will also be liable for tax in
South Africa if resident in the country for more than
91 days in each of the three years.
addition, the guidance points out that income derived
by a foreigner as director's fees from a South African
company will be taxed, and all foreigners earning more
than R35,000 (if under 65 years) or R60,000 (if 65 years
and older) a year must submit an income tax return to
residents may be able to obtain a tax credit on the
tax paid to SARS, depending on whether South Africa
has a tax agreement in place with the taxpayer's home
relocation expenses paid by the individual's employer
will be exempt from South African tax.
foreign employees can claim tax deductions on their
South African tax liability for pension and retirement
fund contributions, medical contributions, legal expenses,
insurance policy premiums, and bad debts relating to
plans drawn up by the South African government in September,
2005, foreign workers are entitled to stay in the country
longer before their overseas earnings become subject
to tax in South Africa.
to this legislation, foreign workers will only be taxed
by the South African Revenue Service (SARS) on their
overseas income after a period of five years working
in the country, up from the previous limit of three
years. This new rule was detailed in SARS's tax guide
for foreign workers for the 2006/7 tax year.
legislation is a welcome move as it is an incentive
to keep expatriates in SA for a longer period without
taxing them," said Luanne Grant, executive director
of the American Chamber of Commerce, according to Business
new proposals are in line with international jurisdictions
such as Canada and Australia," she added.
entertainers and sports people however can expect to
be taxed on income earned in South Africa at 15% under
a new withholding tax system announced by SARS in January,
2006 (which came into force in August of that year).
low levels of compliance, SARS is requiring all firms
which organise entertainment and sporting events to
withhold 15% of payments made to entertainers and sportspersons
and pass on the withheld sum to the taxman.
will have 14 days in which to notify the tax authority
that a deal has been signed, and will become liable
for any tax that they fail to withhold or pass on.
in recognition of the fact that foreign entertainers
and sports people are likely to be be taxed on income
earned in South Africa in their country of residence,
SARS will give them a certificate in order to claim
tax relief from their home tax authority.
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