News24
01 Mar 2020, 23:43 GMT+10
Budget 2020 includes "a desperate attempt" - and a little too late - to change the minds of those South Africans already changing their tax residency to avoid the impact of changes to so-called expat tax which come into effect on March 1, 2020.
This is the view of Jonty Leon and Jean du Toit of Tax Consulting SA.
In December 2017, the change to the foreign employment income exemption was promulgated into law and became widely referred to as the "expat tax".
The exemption was capped at R1 million, meaning that South African tax residents earning foreign employment income above this threshold would no longer be exempt from tax in South Africa.
In his Budget speech on Wednesday, Finance Minister Tito Mboweni, however, announced that an increase in the exemption cap to R1.25 million.
"The increase will unfortunately assist with only a small group of South Africans working abroad, and merely dangles a carrot for the rest of those abroad to entice them to remain within the South African tax net," comments Leon.
Du Toit, also of Tax Consulting SA, says stakeholders have consistently warned National Treasury since the start of the proposal to cap the tax exemption for expats, that implementing the change would lead to more people terminating their South African tax residency.
"The response from government at that point was that the formalisation of non-residency in those cases was to be encouraged," says Du Toit.
"This view was short-sighted and has come back to haunt government as South Africans have in many cases chosen to financially emigrate and thus cease their tax residency with South Africa to avoid paying the expat tax."
READ | Budget 2020 in a nutshell | No major tax changes and ambitious proposal to cut state wage bill
Leon adds that the big issue which has been raised on numerous occasions with government is the issue of fringe benefits, which are taken into account regarding the exemption cap.
"In many cases these fringe benefits deplete the exemption before one even considers the cash component of their salary to be taxed," says Leon.
For him it seems that, as there has been a massive increase in South Africans ceasing residency to avoid the change in legislation, government has taken notice and hence the increase of the cap to R1.25 million instead of R1 milllion.
"The current loss of revenue and potential future loss with South Africans continuing to cease residency means that the expat tax has backfired before it has even become effective," comments Leon.
"The expat tax will continue to be disadvantageous for the South African tax resident, as well as for the South African tax base."
In the view of Leon and Du Toit, the "tide" of South Africans making up their mind to "divorce" South Africa fiscally and formally letting government know their intentions to leave the fiscal net, will probably not be impacted by Budget 2020.
To the contrary, they think it may cause an accelerated effect, as the taxpayer has until March 1, 2021 to exit under a formalised dispensation.
*
Get a daily dose of Sierra Leone Times news through our daily email, its complimentary and keeps you fully up to date with world and business news as well.
Publish news of your business, community or sports group, personnel appointments, major event and more by submitting a news release to Sierra Leone Times.
More InformationSHANGHAI, China: As global demand for electric vehicles continues to rise, China's BYD is looking to double its overseas sales to over...
ANDOVER, Massachusetts: As artificial intelligence drives up energy demand across the United States, Schneider Electric is making a...
WASHINGTON, D.C.: U.S. consumer confidence continued to drop in 2025, hitting its lowest level in 12 years as more Americans worry...
WASHINGTON, D.C.: Alphabet's self-driving division Waymo is preparing to expand its driverless ride-hailing footprint to the heart...
BENGALURU, India: A major regulatory breakthrough in India could mark a turning point for Starlink, Elon Musk's satellite internet...
NEW YORK, New York - Renewed fears about inflation, and U.S. Donald Trump's trade policies say American markets take a deep dive Friday....
CAPE TOWN, South Africa: The U.S. Embassy in South Africa said it received a list of over 67,000 people interested in refugee status...
ABU DHABI, 30th March, 2025 (WAM) - President His Highness Sheikh Mohamed bin Zayed Al Nahyan exchanged greetings today on the occasion...
Visakhapatnam (Andhra Pradesh) [India], March 30 (ANI): Tristan Stubbs is trying his best to learn as much as he can from England legend...
Visakhapatnam (Andhra Pradesh) [India], March 30 (ANI): Faf du Plessis's fiery fifty and Mitchell Starc's scorching five-wicket haul...
New Delhi [India], March 30 (ANI): Former India cricketer-turned-commentator Sanjay Manjrekar feels former Mumbai Indians skipper Rohit...
Melbourne [Australia], March 30 (ANI): Cricket Australia on Sunday announced a blockbuster schedule for the men and women's senior...