MONEY CLINIC | Is the tax legislation intended to tax expats in SA on their foreign earnings?

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To qualify as a South African tax resident you have to satisfy a "residency test" or a "physical presence test"
To qualify as a South African tax resident you have to satisfy a "residency test" or a "physical presence test"

A Fin24 reader looking for clarification on an earlier published Money Clinic article questions the scope of the tax legislation on expats in SA.

He writes: 

I read with interest the article MONEY CLINIC | My son has permanent residency in the UK - should he emigrate financially?. I would like to question the part about exemption of SA tax if resident in UK, (unless it applies to SA earnings, rent, etc.)

I thought the tax law was intending to tax expats in South Africa on their foreign earnings, with exemption of R1 million, on annual foreign earnings.

Perhaps that could be clarified as it was not mentioned in the article.

Ryno Viljoen, chief executive officer of FinGlobal, responds: 

The tax legislation you refer to has the intention to tax South African expats offshore, who are still deemed to be South African tax residents

To qualify as a South African tax resident you have to satisfy a "residency test" or a "physical presence test". In your example, the "residency test" can best be explained by determining where you return to after your wanderings abroad. This scenario typically applies to SA expats working offshore and their homes, families, and financial interests are based in South Africa. 

Should you not satisfy the residency test requirements, your "physical presence" will be considered, i.e. should you spend more than 183 days in South Africa in any particular tax year, you will be deemed a South African tax resident.  

Typical examples of South African expats who will be affected by the tax legislation include people working in the UAE on a contract basis leaving their family behind in South Africa, sending money home, and returning to come to visit from time to time. 

In the case of the son in question, he does not satisfy the residency or the physical presence test, hence he will be deemed a UK tax resident only and not be subject to tax in South Africa.

Questions may be edited for brevity and clarity.

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