South African tax residents who live and work abroad will be required to pay a tax of up to 45% to their home country from March 1 2020 onwards. Those working abroad who fall into the 25% tax bracket in the country they work in most likely fall within South Africa’s 45% tax bracket – so will have to pay the 20% difference to South Africa.
Effectively, this will also apply to expatriates who earn more than R1-million.
The amendment was announced by former Minister of Finance Pravin Gordhan during the 2017 National Budget Speech, and South African Revenue Services (SARS) has already begun prosecuting taxpayers who are non-compliant. In some cases, it also has the option of imprisoning an offender for up to two years.
SARS amendments have already been implemented in preparation of the foreign income tax law change to come next March.
Data from the Treasury and SARS has indicated that many, if not the majority, of South African passport holders and permanent residents have left the country without formalising their financial affairs.
This has prompted SARS to focus a tax audit on expatriates who have left and decided to ignore their taxes. In some cases, expatriates have indicated that they are unemployed when they were, in actual fact, earning money abroad.
Many expatriates are also looking at financial emigration as an option to avoid the heavy taxes back home. As such, an expatriate must notify SARS and the South African Reserve Bank that he or she is no longer “ordinarily resident” in South Africa. This is the only way to formally have a status note changed.