PETER DACHS: Tax incentives needed for skilled foreign workers
21 January 2025 - 05:00
byPeter Dachs
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Much has been written about the proposed new points-based and remote work visa for skilled foreigners.
SA home affairs minister Leon Schreiber has highlighted how skilled and experienced professionals could contribute significantly to SA’s annual economic growth rate, as well as play a vital role in generating employment and creating jobs.
This is part of a global war for talent, with Elon Musk coming out in support of the H-1B visas in the US. These visas allow skilled professionals such as software engineers to work in the US for up to three years. Interestingly, Musk himself once held an H-1B visa that allowed him to live and work in the US.
Given the economic benefits of attracting skilled foreign workers the question arises about the incentives that should be provided to these workers to persuade them to come to SA, as opposed to the US or other jurisdictions. How does SA secure its share of the top global talent pool?
Various jurisdictions provide tax incentives aimed at attracting successful entrepreneurs to their jurisdiction. Perhaps the best known of these jurisdictions was, until recently, the UK, with its so-called “residence, nondomiciled” rules. In terms of this dispensation, individuals whose place of “domicile” was outside the UK were taxed on their UK source income and gains, but were only taxed on their non-UK source income and gains to the extent that this was remitted to the UK.
Other jurisdictions, such as the Netherlands, offer tax incentives to attract skilled foreign workers.SA could therefore consider introducing a tax exemption for certain skilled foreign workers to incentivise them to live and work in the country. The Income Tax Act already includes various provisions that offer certain exclusions from the general tax provisions to encourage investment.
These dispensations demonstrate the SA legislature’s ability and willingness to provide tax exemptions if necessary to facilitate investment. Accordingly, the inclusion of a specific exemption regarding qualifying skilled foreign workers in the Income Tax Act would not seem out of place.
For example, consideration could be given to deeming skilled foreign workers as non-residents for purposes of the Income Tax Act. Such individuals would then only be subject to tax on their SA-sourced income.
Consideration could also be given to allowing wealthy individuals to live and work in SA. In this regard, in Australia under its Business Innovation & Investment Programme foreign nationals, conducting business or investing in Australia, with their dependents, may obtain temporary residence visas.
If an individual operates a new or existing business in Australia or invests at least A$2.5m in Australian investments that meet certain requirements and maintain business or investment activity in Australia, it is possible to obtain a provisional visa that allows that individual to stay in Australia for up to five years.
In the US, in addition to the H-1B visas the USA Citizenship & Immigration Service facilitates a visa in terms of which a national of a country with which the US has a treaty may be admitted to the country when investing a substantial amount of capital in a US business.
To qualify for this visa the treaty investor must have invested, or be actively in the process of investing, a substantial amount of capital in a bona fide enterprise based in the US, and be seeking to enter the US solely to develop and direct the investment enterprise.
To remain globally competitive SA could consider the new visas proposed by the home affairs minister but also offer the necessary tax incentives to skilled foreign workers, and provide visas to wealthy individuals who are prepared to invest appropriate amounts into the economy.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
PETER DACHS: Tax incentives needed for skilled foreign workers
Much has been written about the proposed new points-based and remote work visa for skilled foreigners.
SA home affairs minister Leon Schreiber has highlighted how skilled and experienced professionals could contribute significantly to SA’s annual economic growth rate, as well as play a vital role in generating employment and creating jobs.
This is part of a global war for talent, with Elon Musk coming out in support of the H-1B visas in the US. These visas allow skilled professionals such as software engineers to work in the US for up to three years. Interestingly, Musk himself once held an H-1B visa that allowed him to live and work in the US.
Given the economic benefits of attracting skilled foreign workers the question arises about the incentives that should be provided to these workers to persuade them to come to SA, as opposed to the US or other jurisdictions. How does SA secure its share of the top global talent pool?
Various jurisdictions provide tax incentives aimed at attracting successful entrepreneurs to their jurisdiction. Perhaps the best known of these jurisdictions was, until recently, the UK, with its so-called “residence, nondomiciled” rules. In terms of this dispensation, individuals whose place of “domicile” was outside the UK were taxed on their UK source income and gains, but were only taxed on their non-UK source income and gains to the extent that this was remitted to the UK.
Other jurisdictions, such as the Netherlands, offer tax incentives to attract skilled foreign workers. SA could therefore consider introducing a tax exemption for certain skilled foreign workers to incentivise them to live and work in the country. The Income Tax Act already includes various provisions that offer certain exclusions from the general tax provisions to encourage investment.
These dispensations demonstrate the SA legislature’s ability and willingness to provide tax exemptions if necessary to facilitate investment. Accordingly, the inclusion of a specific exemption regarding qualifying skilled foreign workers in the Income Tax Act would not seem out of place.
For example, consideration could be given to deeming skilled foreign workers as non-residents for purposes of the Income Tax Act. Such individuals would then only be subject to tax on their SA-sourced income.
Consideration could also be given to allowing wealthy individuals to live and work in SA. In this regard, in Australia under its Business Innovation & Investment Programme foreign nationals, conducting business or investing in Australia, with their dependents, may obtain temporary residence visas.
If an individual operates a new or existing business in Australia or invests at least A$2.5m in Australian investments that meet certain requirements and maintain business or investment activity in Australia, it is possible to obtain a provisional visa that allows that individual to stay in Australia for up to five years.
In the US, in addition to the H-1B visas the USA Citizenship & Immigration Service facilitates a visa in terms of which a national of a country with which the US has a treaty may be admitted to the country when investing a substantial amount of capital in a US business.
To qualify for this visa the treaty investor must have invested, or be actively in the process of investing, a substantial amount of capital in a bona fide enterprise based in the US, and be seeking to enter the US solely to develop and direct the investment enterprise.
To remain globally competitive SA could consider the new visas proposed by the home affairs minister but also offer the necessary tax incentives to skilled foreign workers, and provide visas to wealthy individuals who are prepared to invest appropriate amounts into the economy.
*Dachs is head of the ENS tax department.
DA opposes sugar tax while others call for it to be widened
CBO predicts US 2025 deficit to remain at $1.9-trillion mark
Trump treasury pick supports Fed independence, tariffs and Russian sanctions
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Most Read
Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.