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    A comparative study and analysis of the amended foreign employment income exemption in South Africa
    (University of the Witwatersrand, Johannesburg, 2023-01) Essop, Ahmed; Blumenthal, Roy
    Tax exemptions are granted by the government for a multitude of reasons. These include providing some form of tax relief, alleviating specifically identified tax burdens, encouraging investment, promoting donations to approved public benefit organizations and avoiding the possibility of double taxation (Kransdorff, 2010, p. 79). One specific provision in section 10(1)(o)(ii) of the South African Income Tax Act of 1962, pertained to South African residents working abroad, namely the foreign employment income exemption. The intention of this exemption was to prevent residents from being double taxed (SARS, 2021a). Over the last few years, there has been a noted increase in the number of South Africans working abroad and this has been alluded to as being one of the reasons that government decided to review and amend the section 10(1)(o)(ii) foreign employment income exemption (Ryan, 2020). The impact of this amendment on South African residents working abroad will be analysed and investigated. A comparative analysis will be done on the tax payable of South African residents working in the following countries: the UK, the UAE and India
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    A case study on the impact of section 10(1)(o)(ii) of the South African Income Tax Act on South African Expatriates
    (University of the Witwatersrand, Johannesburg, 2023) Forbes, Nicole
    Globalisation has triggered the onset of the migrant work force, which in turn, has created complexities with regards to striking a fine balance between preventing tax spill overs in relation to potential double taxation and remaining tax competitive in order to retain and attract South African tax residents (De Koker & Brincker, 2010; Fuest, Huber, & Mintz, 2005; Spengel & Fischer, 2022). SouthAfrica taxes residents on their worldwide income, and on 1 March 2020, section 10(1)(o)(ii) of the Income Tax Act 1962 (hereafter referred to as “the Act”) was amended with the objective of addressing tax disparities in respect of taxes being levied on remuneration earned from a local source versus internationally, through limiting tax relief to R1, 250,000 for foreign-derived remuneration (Africa, 2021; De Koker & Brincker, 2010; Ferreira, 2020; Govender, 2019; Hutchon & Kim, 2020; Naidoo, 2019; SARS, 2021a, 2021c; Sebashe, Erasmus, & Erasmus, 2021). This discussion-based research report evaluates the impact of the amendment to section 10(1)(o)(ii) in relation to foreign remuneration earned by South African expatriates. Similar to prior research, conducted by Govender (2019), Naidoo (2019) and Sebashe et al. (2021), this research report draws comparisons amongst South African expatriates earning employment income from (i) the United Arab Emirates (UAE), where no personal income tax is currently levied (PwC, 2022c); (ii) the United Kingdom (UK), where non-residents are entitled to a personal allowance, i.e. tax relieve of GBP 12,500 for the 2020/2021 tax year if their UK sourced taxable income is less than GBP 100,000 (Gov.UK, 2022) and (iii) the United States of America (USA), where non-residents or alternatively termed ‘non-resident aliens’, are not entitled to a standard personal tax deduction (PwC, 2022g). The comparative case studies aim to assess whether or not the revised and promulgated section 10(1)(o)(ii) has aided in restoring fairness in the levying of tax, through contrasting i) pre 1 March 2020 tax treatment of section 10(1)(o)(ii), i.e. one hundred percent exemption of foreign remuneration and ii) 1 March 2020 tax treatment of section 10(1)(o)(ii), the introduction of “expat taxation” (Africa, 2021; De Koker & Brincker, 2010; Ferreira, 2020; Govender, 2019; SARS, 2021c; Sebashe et al., 2021). In addition, this report evaluates the impact of through (i) double tax agreements (DTAs); (ii) section 6quat of the Act; (iii) personal allowances/reductions and (iv) change in tax residency on a South African expatriate’s overall local personal tax position (the impact discussed, but not specifically evaluated in the case study computations) (De Koker & Brincker, 2010; Ferreira, 2020; Govender, 2019; Hutchon & Kim, 2020; Sebashe et al., 2021). Furthermore, the report assesses the impact of the revised and promulgatedsection 10(1)(o)(ii) on the low, moderate and high remuneration earners, in accordance with prior research conducted by Sebashe et al. (2021), the aim is to assess whether or not the amended to expat tax exemption, namely, the introduction of the R1,250,000 exemption threshold, had an adverse effect of the local tax positions of low and moderate foreign remuneration earners