Looming SA 'expat tax' is ultimately fair – Citadel
Changes to South Africa's Income Tax Act which will from March 2020 see expatriates taxed locally for income from foreign employment exceeding R1-million is ultimately fair given their continued ties in the country, financial services group Citadel said on Monday.
The National Treasury held a workshop on the proposals on March 6, amid concern that there is little understanding of the practical issues facing employers and employees.
The looming tax amendment makes sense when taking into account that expatriates earning money outside South Africa still own property and have family living in the country, Citadel said.
"It is realistic for such a person to be required to pay some level of direct tax. And the R1-million threshold is quite reasonable considering the tax thresholds enjoyed by employees working in South Africa," it said.
Citadel said if an expatriate was already paying direct tax in another country, then the effect of the new South African tax may be mitigated by tax paid elsewhere in terms of a double tax agreement with possible minimal effect.
"However, it is likely to be felt the most by those people working in tax havens, many of which have high levels of indirect taxes such as value-added tax, but where there is no payroll tax," it said.
For individuals earning less than R1-million abroad, this new amendment would have little impact, but the Treasury was more likely to be targeting individuals such as pilots or oil rig workers who effectively retained a base in South Africa but worked for an offshore company.
"Until now, these individuals were exempt from paying tax in South Africa, despite enjoying the benefits of their families living in the country," Citadel said.
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