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Wednesday, September 9, 2015 - 02:16
Modest suggestion

Expatriates and their employers are grappling with the tax regime for foreigners who render services in South Africa for a relatively short period. These individuals (sometimes referred to as “short-term business travellers”) are generally physically present in SA for periods ranging from only two weeks to four months at a time.

Individuals who:
• are physically present in SA for less than 183 days in a 12-month period;
• do not work for the economic benefit of a South African resident employer (a so-called “economic employer”), whilst in the country; or,
• for a foreign employer, which has a permanent establishment in SA

their remuneration paid by their foreign employer in respect of services rendered in SA would qualify for tax relief in SA under a double taxation agreement (DTA); that is, their salaries would not be subject to tax in SA.
“However,” says Anthea Scholtz, Tax Partner & Global Employer Services Leader at Deloitte, “in practice the expatriate’s economic employer is generally a SA resident company; as for example, one of the foreign employer’s group companies, such as a South African subsidiary company.”
Due to this fact, the remuneration paid by the expatriate’s foreign employer for services rendered here, does not qualify for DTA tax relief in SA – even though the expatriate may be physically present in SA for less than the requisite 183 days.
“In these circumstances, in addition to paying tax in SA, the expatriate would have to pay tax in his/her country of tax residence (generally, their home country) on the same remuneration income,” she explains. This tax position may thus result in significant cash flow problems for the expatriate, as he/she would only be able to claim the South African taxes as a foreign tax credit in their home country at a much later stage. The expatriate would also need to register for income tax in SA, which presents an added compliance burden.
To ease this tax burden, Scholtz suggests a de minimus rule be introduced into our tax laws, which should be applied when ascertaining whether these short-term business travellers qualify for tax relief in SA under a DTA.
This rule could stipulate that, provided the expatriate was physically present in SA for a minimum amount of days in a 12-month period (for example, 90 days could be used as a threshold), the expatriate would not be subject to tax in SA.
Such a change would go a long way to cater for the unique circumstances of these expatriates (especially those operating in the oil and gas industries, mining industries and various other key industries). It would also significantly contribute to promoting SA as suitable centre for global headquarters from which foreign investors could second their skilled staff into the rest of Africa.

Copyright © Insurance Times and Investments® Vol:28.9 1st September, 2015
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