South Africans working abroad will face higher taxes as they will only be exempt from paying tax on the first R1m they earn elsewhere under the amendments to the Income Tax Act which are due to come into effect from March.
The country's Treasury said that additional tax measures were under consideration to raise an extra R10 billion in fiscal 2021. "Given the fiscal position we find ourselves in, all tax options need to be on the table," said Chris Axelson, chief director for economic tax analysis in the Treasury."
Under the changes, the totality of an expat's income earned abroad would be subject to tax in South Africa.
The expat exemption only relates to South Africans who are tax resident, so the obvious answer would be to cease tax residency of South Africa"
"What this means is that, if they remain tax resident, they will be taxed fully on any allowances and benefits, as if they were just a normal employee working in South Africa," Jean du Toit, editor of "Expatriate Tax - South African Citizens Working Abroad and Foreigners in South Africa", told local news outlet Fin24.
One of the unforeseen consequences from what has been dubbed the 'expat tax' could be that South Africans abroad may simply decide to sever their ties with South Africa and cease their tax residency.
"Unfortunately, the solutions for the expat in relation to this amendment are now becoming very limited. The expat exemption only relates to South Africans who are tax resident, so the obvious answer would be to cease tax residency of South Africa," du Toit added.