Currently, if a South African resident works in a foreign country for more than 183 days a year, any employment income earned in that country is exempt from tax, subject to certain conditions.
As a result, that employment income benefits from double non-taxation, which the South African Treasury believes “appears to be excessively generous”.
UAE impact
The proposal was outlined by finance minister Pravin Gordhan in South Africa’s Budget last month.
If approved, it will mean that foreign employment income will only be exempt from taxation in South Africa if it is taxed in the foreign country.
Those working in the UAE will be among those hit by the change.
One person working in Dubai wrote to South African media outlet Fin24 to express his concerns. “The new proposal on taxing those of us who live abroad in countries where are not taxed on our income has us all very worried.”
The Treasury told the media outlet that draft legislation on the proposed tax will be published later in the year for further consultation.
Budget pressure
Under pressure to target the wealthy as he battles weak tax receipts, Gordhan outlined a number of proposals aimed at boosting South Africa’s tax take, which has been ZAR30bn (£1.9bn, $2.3bn, €2.2bn) less than expected this financial year.
He announced a new top tax bracket of 45% that is expected to hit around 100,000 people, including some of the thousands of British expats living in South Africa.
Another significant proposal related to a 20% increase in the rate of dividends withholding tax (DWT).
