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The rise in remote work has given numerous South Africans the opportunity to sell their skills to international companies at rates that often takes the sting out of a weakening local currency. After all, why complain about the pound vs rand if you’re getting paid in the queen’s currency?

But like all good things that happen to South Africans, the government has now decided to poke its nose into international employers using local talent.

The National Treasury recently proposed new tax laws concerning international employers and remote workers, and experts warn it would do more harm than good.

According to tax experts quoted in BusinessTech, proposed changes to the Employee’s Tax Schedule of Income Tax, if promulgated, will result in foreign employers having to register for and withhold Pay-As-You-Earn (PAYE) to the South African Revenue Service (SARS) as well as pay UIF and Skills Development Levies.

So once again, the government sees something that works well and decides to smother it with legislation.

“At face value, this change seems minor and beneficial to the economy as SARS’ tax net will be cast quite wide. In reality, however, these amendments will have far-reaching effects and would add tax compliance hurdles to the sector and its stakeholders.”

Among the new hoops foreign employers would have to jump through are:

• Implementing payroll systems;
• Registering for PAYE, UIF and SDL;
• Registering a branch company within SA;
• Receiving a SARS income tax number; and
• Complying with the Companies and Intellectual Property Commission (CIPC) regulations

Remote work has been one of the positives to rise from the Covid ashes, and with its relatively low cost compared to the quality of living, many have been earning a pretty penny working for companies that pay in a much stronger currency.

Whether they work remotely or not, economically active employees are crucial to the economy, and thousands of remote workers who earn in foreign currency have their earnings deposited into local bank accounts. These dollars and pounds inevitably find their way into the local economy, so it’s not as if the South African purse suffers.

These remote workers contribute to the fiscus by paying VAT and other everyday costs of living, be it food, entertainment, accommodation, or transport. So, while countries like Spain and Portugal are making it more attractive for companies to source remote workers within their borders, SA again seems to want to head in the other direction.

Because, well, government.

Many remote workers receive salaries based on global salary benchmarks, often significantly higher than local equivalents, and they reap the benefits of earning in dollars, pounds or euros.

“In the last six months, 78,4% of remote independent contractors in South Africa on Deel’s platform withdrew their salaries in local currency. As most of these work in the tech and IT sectors and earn dollar-based salaries, they often fall into high individual tax brackets, which is a good thing for tax revenues.”

Needless to say, the proposed tax laws are not a good way of attracting foreign companies’ money or convincing locals to stay and spend in SA.

If you’re one of the lucky few who work remotely, this may be concerning to you, but all is not lost yet. Speaking with a financial services provider like Consequence Wealth Management is a good place to start in ensuring that your foreign paycheck doesn’t go the way of the dodo.

Consequence are experts at ensuring that tax issues do not negatively affect your investments, insurance or general estate planning. They also provide extensive advice and service on offshore bank accounts, money transfers, trusts, and investments domiciled in jurisdictions such as Guernsey, Switzerland, and even tropical Mauritius.

They are also able to assist with Financial Emigration if Treasury really loses the plot.

[source:businesstech]