Skipping out on tax by working

Skipping out on tax by working abroad could soon be a thing of the past

Treasury is shifting its gaze to South Africans working in tax havens for more than 183 days a year to skip out on paying tax back home, and folks are a little worried.

Skipping out on tax by working

So there’s this exemption under South African tax law that says if you spend more than 183 days a year working in a country that has a more relaxed – read attractive – tax system then you don’t have to pay Sars anything. Actually, it doesn’t even have to be one of the tax havens like Qatar, the UAE, Isle of Man or the Cayman islands. You just need to not be working in Mzansi for at least 183 days annually.

That might all come to an end, though, as National Treasury doesn’t think it would be unfair to tax South Africans who are currently scoring from their overseas jobs. The flipside of that argument, however, is that folks who live abroad for 183 days a year don’t get to take advantage of services offered by the South African government, so why should they pay tax for said services?

Treasury’s plans, while not affecting South Africans living and working abroad permanently, are to start taxing folks who work abroad for the minimum of 183 days ONLY if they aren’t already taxed in the countries they’re working. Basically, if you work in a tax-free country South Africa wants to tax you.

According to National Treasury’s Christopher Axelson, these rules aren’t unique to our plans, but that countries like the UK also impose them on their citizens working abroad in tax-havens.

“In our view, we are an outlier in this area by not taxing individuals on their worldwide income and in effect, we are just trying to align. We think it is not quite fair if there are individuals working and living in a global system where they are not actually paying tax anywhere,” Axelson said.

So, why would Treasury want to step in and stop this now? Imagine this: You work for an international firm and you spend 184 days a year in the Dubai office, the rest of the year you’re back in SA. Your entire salary goes into your bank account as is, not a single cent paid to Sars.

It’s still a while off, though, so don’t get too stressed just yet.