For those of you who benefit nicely from close relations who work abroad, you may soon feel a shift in your lifestyle – if SARS has anything to do about it.

The current law, according to Times LIVE, determines that “South African tax residents abroad must disclose their world-wide income to the South African Revenue Service (SARS)‚ and may then claim an exemption on their employment income physically earned outside South Africa”.

However, this is set to change as early as March 2019.

Although South Africans were warned back in February, by then Finance Minister Pravin Gordhan, that changes to this section “were on the horizon,” a draft law amendments for 2017 proposes far harsher tax treatments than expected.

Ready? Here’s what you can expect:

If you have a good job overseas‚ living in a country where the tax rate is 25%‚ but your salary falls into South Africa’s 45% tax bracket‚ the taxman now wants to come after you to collect the difference of 20%.

Here’s Wikipedia’s list of countries and their tax rates, just in case you have no idea how much tax is being deducted from your salary.

Tax consultant Jerry Both said the draft law recommends that the exemption section 10(1)(o)(ii) be completely repealed:

“This means foreign employment income will become fully taxable‚ and the only relief may be claimed is foreign taxes paid as a tax credit. For example‚ where the employee falls into the 45% tax bracket and pays 25% tax in the foreign country‚ the SARS will now collect the difference of 20%‚” he explained.

“There are limited options for South Africans abroad‚ should this law take effect‚” Botha said.

“One alternative would be to properly emigrate‚ in which case there is a deemed disposal capital gains tax event. SARS probably anticipates this likely move‚ as the 2016/17 tax return now has a specific disclosure hereon‚ which never previously existed.

“Other taxpayers are looking at establishing tax treaty residency in another country‚ but this is not as simple as getting a tax residency certificate somewhere else. Anyone who has been through a SARS process (on this) would know how complex this may become.

Botha said this move by the taxman could see more South Africans doing a cost estimate and possibly returning home.

“We have seen some expatriates indicating that with full tax on international employment income‚ which is what is effectively proposed‚ coupled with the high costs of international work‚ coming home may be their only alternative‚” he said.

Of course, it being a draft law and all, the comment deadline is Friday, August 18 of this year, so get on that if you have an issue.

If you need any assistance with what this might mean for you, contact Galbraith | Rushby for sound tax advice.

[source:timeslive]