The Foreign Employment Income Exemption Bill has shocked South Africans working in the UAE. With effect from 1 March 2020, many South Africans working abroad may be taxed in South Africa on their foreign employment income subject to an exemption on the first R1 million.
The bill proposes a modification of the current exemption and many South Africans working abroad could be taxed in South Africa on their foreign employment income, subject to any offset of foreign tax paid.
According to Sable International’s Mike Abbott, there are a few groups who will be affected:
- Those living in a country that does not have a double tax treaty with South Africa
- Those living and earning abroad that still meet the South African ordinary or physical presence test
The Sable team outlined some tips to alleviate the double taxation conundrum:
- Get advice on your residence position vis-a-vis South Africa
- Get advice on possibility of claiming treaty relief;
- Get advice on whether financial emigration should be considered;
- Get advice on restructuring your assets before returning or moving to another country that imposes tax on its residents.
“South Africa has a residence-based system of taxation, so in general the government is able to tax your worldwide income if you are ordinarily resident in South Africa or meet the requirements of the physical presence test.
Most DTAs contain specific provisions on the definition of a resident in order to settle which of the two countries (where a person may be dual resident) has the primary taxing rights over such person”.
Abbott noted: “The Sable International team will not only help expats in the UAE with their tax, but will also outline dual citizenship opportunities in several countries around the world, primarily in the UK, Australia and Portugal.”
The team from Sable International advise that South Africans working abroad may claim the relief in terms of a Double Taxation Agreement (DTA). They will be in Dubai next month to guide South Africans to determine their position and options. These will be outlined at four seminars on 8 & 9 November at the Carlton Hotel Downtown in Dubai.