Serious Tax Consequences for Expatriate Employees

Pravin targets expatriate employees to Dubai

There is probably no-one more unhappy about the budget speech announcements than expatriate employees to Dubai.


Currently, if a South African resident works in a foreign country for more than 183 days a year, foreign

employment income earned is exempt from tax, subject to certain conditions. This exemption is for

employees of private-sector companies. In terms of the residence-based system of taxation, South African

residents are taxed on their worldwide income. However, this exemption on foreign employment income

appears excessively generous. If a resident works in a foreign country for more than 183 days with no tax

payable in the foreign country, that foreign employment income will benefit from double non-taxation. It

is proposed that this exemption be adjusted so that foreign employment income will only be exempt from

tax if it is subject to tax in the foreign country.


One will need to see the actual draft legislation, but it appears quite clear that where you do not pay tax in the country where you work, you will no longer qualify for exemption from South African taxes. Coupled with the newly pronounced 45% over R1,5m, this makes extra bad reading. Obviously this also impacts wider than and anyone who claims the exemption and does not pay taxes somewhere else, will now be impacted.