BUSINESS NEWS - SIKI MGABADELI: The Treasury 2017 Budget Review proposed the removal of the foreign-employment income exemption as one of the focus areas to reduce tax avoidance.
Joining me today to discuss the proposal and its implications for the man on the street is Lesedi Seforo, who is tax project manager with the South African Institute of Chartered Accountants. Thank you so much, Lesedi, for your time today.
Before we look at the changes, let’s look at exactly what this exemption as all about.
LESEDI SEFORO: Well, the exemption, as you alluded to earlier, was brought about by the Minister of Finance in the Budget Review. These are documents that accompany the budget speech. So it wasn’t said exactly in the budget speech, but in these documents.
SIKI MGABADELI: We look at income and expenditure and all of that – those thick ones that people don’t look at afterwards.
LESEDI SEFORO: Treasury has said in those documents that it is excessively generous. The proposal is essentially trying to do away with this concept of double non-taxation that is going on in international tax. So first, as a starting point, you should know that if you are a South African resident you get taxed on your worldwide income, regardless of where it is earned.
Now sometimes you have people who are sent on international assignments to foreign countries as employees. Let’s say you’ve got an engineer going to Dubai on a construction project for a certain number of months or years – what will happen there is South Africa will seek to tax that income. But because of the worldwide system of taxation, but there is an exemption in this instance where, if you are in that country for let’s say over six months in a 12-month period, including 60 continuous days in that country, then South Africa gives up its right to tax that income.
The proposal is essentially geared at countries that don’t impose an income tax. That’s a lot of the oil-rich countries.
SIKI MGABADELI: I was going to ask you what sort of countries you are talking about there. Can you give us some examples of countries that don’t have it?
LESEDI SEFORO: These include, as I said, the oil-rich countries like UAE, Saudi Arabia, Qatar, Oman. But you also have a lot of these little islands like the British Virgin Islands, Bermuda, Bahamas, etc.
