DANIEL BAINES: Who do you pay tax to as a South African working abroad?
If you are leaving SA to work in a foreign country on a temporary basis, you will remain a tax resident in SA
As a South African working in SA you might find yourself in a position where your employer needs you to work outside of the country temporarily; or you request from your employer that you work out of the country temporarily; or that you work for a completely new employer in a foreign country temporarily.
You may be wondering how taxation works in these scenarios.
If you are leaving SA to work in a foreign country on a temporary basis, you will remain a tax resident in SA.
You are tax resident if you live here permanently and consider SA to be your home. This is a complicated area of tax that each person would need to establish, considering their own circumstances.
As a local tax resident you are taxed on your worldwide income.
As such, you are liable for taxation in SA on the employment income that you have earned in another country (subject to the exemption discussed below).
Even if you are not liable for tax in SA on the foreign employment income, the amounts must still be declared on your annual tax return as an exempt amount.
Taxation in country of work
What then needs to be determined is whether you are also liable to pay tax in the country in which you are temporarily working. This answer will vary depending on the country.
However, the general rule is that if you are working in another country for fewer than 183 days in any 12-month period commencing or ending in the tax year concerned, you will not be taxed on your employment income in that country.
You will only be taxed on this income in SA.
This is presuming that the employer paying your salary is a South African company and is not based in the other country.
If you are being paid by a company based in the other country, the general rule is that you will be taxed in that country on the employment income earned there. It doesn't matter how long you are in that country.
This would be applicable if you have found your own employment abroad with a foreign employer.
If you have been sent by your South African employer to a branch of the company in a foreign country, you must check with your employer who will be paying you.
You may also find yourself in a situation where you are paying tax in your new country of work and must still declare and pay tax on this same income in SA. This would be the case if you do not qualify for the exemption discussed below as you are taxed on worldwide income in SA.
If you are paying tax in the foreign country and do not qualify for the foreign employment income exemption, this foreign tax can be set off against any South African tax that is owing in respect of that foreign employment income.
Foreign employment income exemption
If you are working outside of SA for more than 183 days in a year and have been out of the country for 60 continuous days during that year, you may qualify for the foreign employment income exemption.
This means that you are not liable for taxation in SA on your foreign employment income.
This income must, however, still be declared to the South African Revenue Service as exempt income.
This exemption may come in handy if you are working in a country where there are low or no income taxes.
For example, if you work temporarily in Dubai and are not paying income tax in Dubai, you would still be liable for taxation on the Dubai income in SA unless you qualify for the foreign employment income exemption.
In other words, if you are working in Dubai and qualify for the foreign employment exemption, you will not be taxed in SA on the Dubai income.
However, if you do not qualify for the exemption, you will pay tax on your Dubai income in SA.
Bear in mind that this foreign income employment exemption is set to change from March 1 2020, after which amounts earned over R1m will not qualify for this exemption.
• Baines is the author of How to Get a Sars Refund and a tax consultant at Mazars