Many South African expats are concerned about the impact on them consequent upon the change to the 183/60 days exemption. We provide some tips below to establish the effect, if any, that the change will have:
- The exemption only applies to SA tax residents. Non-residents who earn remuneration for employment services rendered outside South Africa is not taxable in South Africa on such remuneration.
- Step 1 is therefore to establish the residency of the taxpayer under SA domestic law. SARS’ Interpretation Notes 3 and 4 provides some guidance on this point. You can access them here.
- If the person is tax resident in South Africa under South African tax law, Step 2 is to establish if the person is also tax resident in another country. If so, establish if there is a tax treaty between South Africa and the other country – you can check this here.
- If there is a treaty, check the facts to establish if the treaty breaks residency in favour of the other country. If so, the person is not South African tax resident and hence the change to the exemption will have no effect on that person.
- If there is no treaty or there is a treaty but the residency remains in South Africa, the change to the exemption is likely to have an effect on the tax liability on salary earned in respect of employment exercised outside South Africa.
- Such person who is indeed tax resident in South Africa can consider arranging his or her affairs in such a way to cease tax residency. Contrary to popular believe, formal emigration is not a prerequisite for ceasing tax residency.