In February 2017, the government proposed scrapping an “overly generous” tax exemption on income earned overseas.
However, a joint report published Thursday by the National Treasury and South Africa Revenue Service (Sars) accepted that repealling the exemption would have “a severely negative impact on finances and remittances to South Africa, especially for those on relatively lower incomes”.
The amendment followed a public consultation on the changes that closed on 18 August.
The backtracking by the government is a victory for expat and interest groups that lobbied against scrapping the exemption.
Barry Pretorius, founder of the South African Expat Tax Petition Group, told International Adviser that “it certainly addresses a large part of our concerns”.
“We have taken a complete repeal and turned it into this, which provides full exemption for 60-65% of the group and many young people coming abroad.”
Abu Dhabi-based Pretorius formed the group on Facebook and, with the support of the South African expat community around the world, put together a petition opposing the proposals and submitted it to Sars.
He also flew to South Africa and spoke before parliament on 29 August to explain the concerns of expats to politicians.
Pretorius believes there is still work to be done and wants to get clarity on tax deductibles for those earning more than ZAR1m.
What are the changes?
The Treasury reports states: “The proposal will be changed to allow the first ZAR1m of foreign remuneration to be exempt from tax in South Africa if the individual is outside of the republic for more than 183 days, as well as for a continuous period of longer than 60 days during a 12-month period.
“The exemption threshold should reduce the impact of the amendment for lower to middle class South African tax residents who are earning remuneration abroad.
“The effect of the exemption will also be that South African tax residents in high income tax countries are unlikely to be required to pay any additional top up payments to Sars,” the report said.
The changes are expected to go live from March 2019.