Prior to the 2012 tax year, SARS did not have much knowledge and experience of South Africans working abroad: either for a foreign employer or a South African registered employer. This gap was the result of our income tax system changing from being source-based to being residence-based a decade prior.
In the 2012 budget speech, mention was made of SARS’ intention of targeting South African residents earning foreign income. A specialised expat unit was subsequently established by SARS and is now fully operational to ensure that our expats conform to their individual tax responsibilities. Furthermore, SARS can now identify foreign income earners via PAYE reconcilations, irrespective if tax was deducted from your income or not.
Several SARS interpretation notes have been updated and the e-filing system revised to now accommodate foreign income earners relevant to how and where to declare such income. In the 2017 tax year the Income Tax Act 58/1962 was amended to limit the exemption of foreign employment income to R1 million per tax year, commencing on 1 March 2020 which is the 2021 tax year.
This change in legislation is currently creating confusion and panic, resulted in many South Africans uprooting their families to emigrate, without first obtaining the necessary knowledge relevant to how this change might impact them.