Foreign employment income: who has the taxing rights? A comparative study on tax provisions in relation to foreign employment income

Abstract

The cross-border mobility of human capital has resulted in a situation where employees might be taxed by more than one tax jurisdiction. One tax jurisdiction might tax the employee based on residency and the other tax jurisdiction might tax based on source. This cross-border mobility could result in adverse impact on the tax base of a tax jurisdiction if there are no tax provisions dealing specifically with foreign employment income.

The predominant principle applied internationally by the Organisation for Economic Co- operation and Development (OECD) countries is that the source of foreign employment income is where the services are rendered and shall be taxed in the source country unless certain requirements are met.

This research report seeks to interrogate the concept of taxing rights in relation to the foreign employment income. A comparison between South Africa, Australia, and the United States of America’s tax provisions in relation to the foreign employment income will be undertaken.