EXPATRIATE TAX EXEMPTION | NATIONAL TREASURY FEEDBACK

Dear EPG Members: Kindly note that we have been asked by Barry Pretorius to give technical feedback which is factually accurate, but also non-technical, on the National Treasury Workshop. Where any member wants a more technical explanation around the items noted below, we have recorded the whole session which may be used to confirm accuracy […]

Our Fight Against the Amended Expat Tax Law

Tax Implications For Expatriates With Foreign Pensions

South African Expatriates – Targeted Again in Budget 2018/19

The Budget 2018/19, once again, has not been kind to South African expatriates. Last year, in the 2017/18 Budget Speech, they targeted our normal salary and benefits. This year, their sights are set on a far bigger prize – they now want to come after our offshore retirement.

Tax Law Changes by Ambush

When last year’s tax announcement was made on expatriates, many fellow South African expatriates believed at first this was fake news. They listened to the whole budget speech, again-and-again, but could not find the announced tax law change. The actual budget announcement is a mere publicity stunt; with the damage hidden in the detail.

Last week, hidden in Annexure C on page 131, under perhaps a misleading heading, they have announced – 

“Tax treatment of contributions to retirement funds situated outside South Africa: The Income Tax Act currently exempts all retirement benefits from a foreign source for employment rendered outside of South Africa from taxation. The interaction of this exemption with double taxation agreements and other provisions of the Income Tax Act will be reviewed to ensure that the principle of allowing deductible contributions only in cases where benefits are taxable is upheld.” 

We Cannot Trust This

We have seen the narrative before.  The previous year’s Budget Speech announcement also materialised to be a far cry from what was factually implemented. Initially they only suggested to tax certain classes of South Africans who were not paying tax anywhere. In the Parliamentary session they conceded that the plan, all along, was to repeal the whole exemption. 

What Items Are At Risk

The following items are at risk:

  • End of service benefits and gratuities, including amounts payable under labour law on termination of contracts.
  • Compulsory employer pension payouts.
  • Offshore pension scheme benefits, relating to services rendered outside South Africa.

The most alarming part hereof is that this law change is effectively retrospective legislation. Some expatriates have worked for years under a specific dispensation to build-up a sufficient retirement; but changing the law now will have a material effect. No-one will have enough retirement and we need to demand greater certainty.

The Prior Year Items Still Unresolved

They have also not made an announcement in this year’s budget on items which we hope they would still be consulting on. These include –

  • Currency conversion rates. The R1m exemption is a moving target taken the high volatility of the ZAR.
  • Fringe benefits. There are many benefits which are taxable under South African law and which are fully taxable under South African law. We need exemptions for these items which should not be economically taxable.
  • Expatriate allowances. There are many allowances paid to expatriates to cover genuine costs of expatriation. These are taxable under the current law, and the tax law does not give a corresponding tax deduction; even where the genuine expense is proven to be incurred.
Call To Arms

As we reach the end of the 2018 tax year and we have only two more tax cycles before 1 March 2020 it is vital that our expat support base of the TPG – Tax Petition Group – continues to grow and with your donations our ability to flex our financial muscles to counter increasing measures by the government to increase revenue streams by tapping into incomes earned by South Africans working abroad.

The change in governance has brought hope to many a South African that both the economy and health of South Africa will improve. We can, however, expect in turn that our Treasury and Receiver Of Revenue will become more streamlined and focused on refining tax laws and processes to fund the huge fiscal shortfall and we cannot assume that tax laws on foreign income earned will not be changed within the next couple of years impacting our pockets.

We please need your continued support hereon.

Please let me know of instances and examples which we still need to address, so that we can again build our case and protect the interests of expatriates and the many South Africans whom we support.

Barry Pretorius

TPG – Chairman


Enquiries: barry@taxpetitiongroup.co.za

Facebook Group: https://www.facebook.com/TaxPetitionGroup


 

SARS And The National Treasury Seek 50 Billion Rand

Dear Members,

We are expecting additional pressure in 2018 on tax changes as SARS and the National Treasury seek to find 50 Billion Rand to make up the budget deficit. It is vital that we grow our member numbers to have a strong platform from which to lobby and oppose taxation levied on South Africans earning an income abroad.

Our membership numbers are steadily growing, and we wish to thank those whom have started making contributions to our nonprofit organization as we approach this Christmas holidays and festive season.

We have attended this treasury workshop on behalf of the TPG members and the following are highlights of the workshop:

1. National Treasury (Treasury”) invited stakeholders to attend a consultative workshop to discuss certain technical issues raised regarding the current tax legislation and possible amendments thereto. These were held at the Development Bank of Southern Africa and the matter of section 10(1)(o)(ii) was discussed on the 6th of December 2017.

2. The purpose of the workshop was for Treasury to obtain clarification on certain items that were raised in the submissions made to Parliament, and the amendment of section 10(1)(o)(ii) of the Income Tax Act (“the foreign income exemption”) was one of many items which were discussed.

3. For purposes of this consultative session, Treasury specifically invited comments on the issues raised in respect of the possibility of double taxation, the burden of proof of foreign taxes paid and aligning the treatment of parastatal employees and employees in the private sector under this provision. The following can be distilled from the discussions:

3.1. It was pointed out to Treasury that its proposal of obtaining hardship directives from SARS to address the issue of double taxation presents difficulties. The fact that such directives would need to be obtained for each individual employee would create a surge in applications, placing a massive administrative burden on SARS. Where any of your members have examples hereof, we ask that they should please be forwarded to us.

3.2. It was further noted that there is no indication of what will serve as sufficient proof of taxes paid in foreign jurisdictions, and that proof that will be accepted by SARS might be very difficult to source, particularly from certain African jurisdictions. Where any of your members have examples of countries where employers pay foreign taxes and those are not directly reported on employee personal tax returns, we ask those please be forwarded to us.

3.3. Treasury acknowledged the practical and administrative concerns raised and noted that the provision will need to be revisited for possible further amendment and clarification.

3.4. Treasury noted further that there are certain items that were not included in the agenda at this juncture, and that these items are still being considered.

4. As the amendment to the foreign income exemption is set to only take effect on 1 March 2020, there will be further opportunity to address other concerns surrounding this amendment. Most important is the proposed limit on the exemption, which is a far more complex issue. The motivation to change the limit on the exemption will need to be substantiated by precise calculations and concrete information.

5. Therefore, it is paramount that we continue our engagement with Treasury and make use of all the upcoming opportunities to make sound representations to ensure that individuals working abroad are treated fairly under this provision.


Enquiries: barry@taxpetitiongroup.co.za

Facebook Group: https://www.facebook.com/TaxPetitionGroup


 

TPG Opens Its Doors For South Africans Working Abroad

Our non-profit organization, established this month, has already more than two hundred registered members and we look forward to growing into a strong presence to impact taxation laws and issues related to South Africans earning an income abroad.

We have already started receiving donations towards this month end. Donations are requested to obtain the services of experts and put infrastructure in place to represent, engage and interact with the South African Treasury and Receiver Of Revenue to impact existing and future changes to the tax laws to ensure that our members best interests are protected.

We also have a new Presidential Fiscal Committee, who are now deciding on future tax increases. They have gone on record yesterday (the 27th of November 2017) to say they are looking at R15bn more taxes and as expatriates we are easy targets.

There are many issues with the impending changes to article 10 and taxation being enacted such as “allowances” and “fringe benefits” which are not tax exempt. The Rand’s performance against foreign currencies and in general is confusion on determining status of the “ordinary tax resident”.

TPG will also be attending the SARS and National Treasury workshop to be held on 6 December on behalf of our members.

This workshop relates to the Annexure C (Individuals. Employment and savings; VAT & Tax administration act.) of the 2018 Budget review. Based upon articles in the media over the past weeks we are concerned that even more avenues of taxing expats may be raised by the government.

We invite all our members to send their comments, requests and items related to taxation on foreign income earned to us to determine and prepare a list of the highest priority items our members want addressed and to align our efforts to act and serve your best interests.

The initial wins we had have generated a large saving for all of us, but I am increasingly getting private messages and we simply have to keep them honest.


Enquiries: barry@taxpetitiongroup.co.za

Facebook Group: https://www.facebook.com/TaxPetitionGroup


 

The Expats Tax Petition Group is Now an Organisation