SARS Releases Guide To Taxation For Foreign Workers

by Robert Lee, Tax-News.com, London

09 March 2005

The South African Revenue Service (SARS) has published a guide to taxation for foreign residents of South Africa, in order to help clarify the tax position of expatriate workers following the switch from a source-based tax system to a residence-based regime in 2002.

Under the ‘physical presence’ test used to determine liability for South African taxes, those who are resident in the country for more than 549 days in a three-year period will be taxed on their worldwide income. They will also be liable for tax in South Africa if resident in the country for more than 91 days in each of the three years

In addition, the guidance points out that income derived by a foreigner as director's fees from a South African company will be taxed, and all foreigners earning more than R60,000 (US$10,300) a year must submit an income tax return to SARS.

Foreign residents may be able to obtain a tax credit on the tax paid to SARS, depending on whether South Africa has a tax agreement in place with the taxpayer’s home country.

However, relocation expenses paid by the individual’s employer will be exempt from South African tax.

Furthermore, foreign employees can claim tax deductions on their South African tax liability for pension and retirement fund contributions, medical contributions, legal expenses, insurance policy premiums, and bad debts relating to employment.

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