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The so-called ‘Expat Tax’ changes have been looming large in the distance for a while now, but the time for implementation has almost arrived.
When the new amendments to the Income Tax Act come into effect from March 1, it’s estimated that thousands of South Africans who spend the majority of their time working abroad will be affected.
As things stand, South African tax residents who work outside the country for longer than half of the year (classed as 183 full days) can be granted exemption on their income tax.
When the change kicks in come March, those same South Africans will now only receive an exemption on the first R1 million earned, with any earnings thereafter taxed according to SARS tax laws.
I guess this is one of the ways in which SARS looks to recoup the mountains of money it has squandered through years and years of criminal mismanagement.
R1 million might sound like a decent whack, but when you factor in the exchange rate with currencies like the US dollar, pound, or Euro, you’re going to see many South Africans flirting with that mark, if not crossing it.
It may be time to reach out to a tax professional for a quick check-in.
Tim Mertens, chairman of Sovereign Trust, had the following to say, according to BusinessTech:
He said that this amount will also include taxable fringe benefits such as housing, pension and travel allowances.
“(Taking these into account) it would seem that many people living overseas will be in excess of the amount and then be subject to South African tax.”
Mertens said that up to 100,000 South Africans live in Dubai alone and approximately 3,000 South African residents live in Hong Kong.
“There are South Africans working in all parts of the world such as Europe, Asia and elsewhere, so it is potentially quite a coup for SARS if they can tap into that tax base.
“It does mean that residents working really have to consider their tax affairs very carefully now.”
You could call it a coup for SARS, or you could point out the likelihood that this will cause many South Africans to permanently emigrate, taking more money out of the country.
As Mertens makes clear, and as SARS has shown over the past year when talking about the harsh punishments in place for those who don’t pay their taxes correctly, you don’t want to fall foul of the law on this front.
We recommend Galbraith | Rushby, who offer professional tax compliance and advisory services to individuals and businesses, but just make sure you’re checking in with someone who is familiar with the changes come March.
[source:businesstech]
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