First Hit Against South Africans Abroad

In February 2017, in the South African Budget Speech, mention was made that the current exemption of Section 10(1)(o)(ii) (“the Expat Exemption”) of the Income Tax Act No. 58 of 1962 (“the Act”), which allows South African’s working abroad to exempt their foreign employment income from tax in South Africa, would be repealed in its entirety.

The effect of this was that a South African tax resident earning a salary abroad would be liable for tax in South Africa on that income in accordance with South Africa’s standard tax tables.

Formalization of Budget Comments

Shortly after the Budget Speech, Parliament released the Draft Taxation Amendment Bill (“the draft Bill”), which amongst other amendments included the comments that the entire Expat Exemption would be repealed. Thus, there would be no protection for South Africans working abroad.

Part of the reason for the suggested repeal was because South Africans abroad were grossly non-compliant, as mentioned in Parliament. South Africans were not declaring their foreign income in South Africa as they should have been and thus there was a vast under-recovery of tax by SARS.

The amendment to the Act was set to take effect from 1 March 2019, giving South Africans less than 24 months to deal with the devastating effects this would have on them and their families.

Defence of South Africans Abroad – Formation of the South African Tax Petition Group

With the draft Bill, an allowance for comments to be made is given to the public to ensure concerned views can be considered. Barry Pretorius (“Pretorius”) thus created the South African Tax Petition Group to counter the amended Expat Exemption and worked with Jerry Botha (“Botha”) of Tax Consulting South Africa to create a formal submission to National Treasury.

Both Pretorius and Botha attended Parliament to argue from various standpoints just how unfair, illogical and detrimental the amendment to the Expat Exemption would be should it be turned into law.

They managed to obtain relief and raise vital awareness as per the below:

  1. The effective date of the amended Expat Exemption would be pushed back to 1 March 2020;
  2. The Expat Exemption would not be repealed in its entirety, however it would be amended to place a R1 million cap on the exemption; and
  3. Parliament, National Treasury and SARS were all made aware of the significant problems that not only the repeal of the law, but even just the amendment of it would cause for South Africans abroad.

The amendment to the Expat Exemption was thereafter promulgated into law in December 2017.

The Fight Continues

The South African Tax Petition Group along with Tax Consulting South Africa decided to not bow out after the Expat Exemption had been promulgated, and during the course of 2018 did research on South Africans abroad and spoke with many individuals and employers who would be impacted by this amendment.

When the opportunity arose at the end of 2018, a second formal submission was made to National Treasury in order to fight for further relief on behalf of South African taxpayers abroad. The submission focused on exempting fringe benefits and allowances that are provided to employees while they are working abroad, like housing, schooling, security etc. This would drastically assist taxpayers in regards to the R1 million cap.

The submission was heard by National Treasury, and due to the amount of feedback and important examples that were provided showing the negative impact, National Treasury agreed that this matter required further investigation. In December 2018, National Treasury advised that a Special Workshop would be formed to discuss the issues raised in the submission in early 2019.

This is a crucial step in the right direction and National Treasury is set to decide on a date for this Special Workshop within the coming weeks.

The Battle is Won – Now for the War

Having succeeded with the first submission in bringing about important relief, the second submission being taken seriously and a Special Workshop being called for, the South African Tax Petition Group has won some significant battles.

The war is not over. The second submission is set to be fought for further relief and support from members is vital. Support in terms of providing information which can be used in argument to National Treasury as well as financial support to ensure the South African Tax Petition Group remains a source of professional information sharing and a figurehead for South Africans abroad.

The South African Tax Petition Group calls on its members to be active and assist it with its fight for tax relief on all fronts.