Expatriate Taxation
As an individual earning foreign income, the changes in the last budget speech have made some of us aware of complications that we are not prepared for. Expat tax as it has come to be known, is the change in foreign income exemption for South African tax residents, to include all income more than R 1 250 000 earned.
Many current South Africans living abroad believes that they are not a physical resident of South Africa, they do not have to pay heed to these taxes.
South Africa is part of the Automatic Exchange of Information (AEOI) system, a new global standard that aims to crack down on cross-border tax evasion. Which means even if you think you do not owe tax but indeed do, your foreign bank will most probably soon be exchanging your information (if indeed they are not already doing so) with SARB where SARS would come to know of any outstanding amounts due.
How do you confirm whether you have to pay tax?
iExpats hosts a great summary of the full considerations. We have highlighted points to look at below from the following article. https://www.iexpats.com/south-africa-expat-tax/
https://www.iexpats.com/south-africa-expat-tax/#Are_you_really_a_South_African_Expat
https://www.iexpats.com/south-africa-expat-tax/#What_about_financial_emigration_out_of_South_Africa
If indeed you are a South African tax resident, you must now plan how to manage this tax efficiently and consider methods to reduce your tax burden in a legal way.
Zurk Botha Associates (ZBA) specializes in investments to suit your needs and to assist with your tax planning. Investments are modelled according to our risk profile and the term before you return to South Africa or require the funds.
Examples of these are:
Taxable income reduced by:
Tax on investments incomes and capital gains may be also be reduced:
All income including those from foreign investments forms part of your total taxable income and must be included.
You earned QAR 40 000 salary per month with QAR12 000 for housing and car allowance. As these are fringe benefits, they are also taxable which gives you an annual salary of QAR 624 000 or a R3 000 000 (aprx) income per annum. The exchange rate will be determined by the Income tax act 1962 which is an averaged exchange rate that should be used to calculate the Rand value of the foreign currency. https://www.sars.gov.za/Legal/Legal-Publications/Pages/Average-Exchange-Rates.aspx [Next publication is about:blankexpected to be posted September 2020].
Example of No Tax efficient Vehicle | |
Annual taxable income gross | R3,000,000.00 |
less expat tax exclusion | R1,250,000.00 |
R1,750,000.00 | |
Less deductions | |
Medical aid (Please see medical aid tax credits) (example amount) | R3,960.00 |
Donations (maximum 10% of taxable income) | R0.00 |
Others | R0.00 |
Taxable income less deductions | R1,746,040.00 |
Tax liable R532041+45% of amount over R1’500’000 | R642,759.00 |
Individual tax rebate individuals younger than 65 | R14,958.00 |
Tax payable Nett | R627,801.00 |
Effective Tax rate | 20.93% |
Example of With Tax efficient Vehicle | |
Annual taxable income gross | R3,000,000.00 |
less expat tax exclusion | R1,250,000.00 |
R1,750,000.00 | |
Less deductions | |
Retirement Annuity (Contribution 27.5% of taxable income with maximum yearly R350 000 as example amount) | R350,000.00 |
Medical aid (Please see medical aid tax credits) (example amount) | R3,960.00 |
Donations (maximum 10% of taxable income) | R0.00 |
Others | R0.00 |
Taxable less deductions | R1,396,040.00 |
Tax liable R207448 + 41% of amount over R708 310 | R489,417.30 |
Individual tax rebate for individual less 65 | R14,958.00 |
Tax amount Nett | R474,459.30 |
Effective Tax rate | 15.82% |
Possible yearly tax saved of | R153,341.70 |
We are here to help you and advise you accordingly, reach out today!
Expat Tax
Zurk Botha Associates (ZBA) specializes in investments to suit your needs and to assist with your tax planning. Investments are modelled according to our risk profile and the term before you return to South Africa or require the funds.
Tel: (012) 991 3830/1
Fax: (012) 991 3991