The South African Expatriates Tax Petition Group was founded to advance the interests of expats earning income outside of their home country who might become liable under new legislation to pay tax in South Africa.
Barry Pretorius, who lives in Abu Dhabi and set up the group, said that the proposed changes, outlined in South Africa’s Budget in February, may have serious unintended consequences for him and his compatriots.
Tax free jurisdictions
If approved, the proposals would mean that foreign employment income would only be exempt from taxation in South Africa if it is taxed in the country in which it is earned.
“This tax law change may have a direct impact on any South African working in a tax-free location, including UAE, Oman, Bahrain, Qatar, Saudi Arabia, Kuwait, Bermuda, Cayman Islands, the Bahamas and Brunei,” wrote Pretorius.
“Furthermore, the adversely affected may include international airline pilots and related trades, where they are based outside South Africa in a foreign location but do not pay taxes in their host countries due to services performed outside the host country.”
This category also includes “offshore workers such as oil rig workers, engineers and other highly specialised skilled workers working on special tax-free designated construction projects or well-fare projects, seafarers, workers on passenger vehicles and any other trade where income tax is not legally paid on their employment services in the host country”.
Not so hasty
The petition letter, which will be formally submitted to the South African National Treasury, requests that the proposed tax law change “not be promulgated with haste”.
The expat group said that it is committed to supporting National Treasury with information on expats working abroad but cautioned that it has already resulted in many South Africans taking active steps towards formal emigration.
The letter said that, “contrary to some public comments made by National Treasury”, the proposed law “may be contra what other countries have adopted”.
“By taxing South African expatriates where other country expatriates are not taxed including United Kingdom, United States (de minimus rule), France, Germany, India, China, Russia, Brazil, Canada (and pretty much every other country providing skilled resources), we caution to not place South African expatriates at a disadvantage compared to other nationalities.”
It also outlines how expats in the UAE, in particular, incur higher costs of living and local taxation of expatriates that falls outside the scope of income tax, including a 3% tax on annual accommodation paid by expats in Abu Dhabi.