Employers sending South African employees on extended foreign secondments face various practical challenges and tax residency is one of them.
The year 2017 saw National Treasury relooking the foreign remuneration exemption in section 10(1)(o)(ii) of the Income Tax Act 58 of 1962 (ITA) for the first time since the year 2000 when South Africa migrated to a residency-based tax system. It, however, became quickly evident that historical challenges and practices raised as much concern as the future proposals. National Treasury and SARS have purposefully postponed the effective date of the new legislative proposals to 2020 so that they can address practical challenges identified in this period. However, as was evident in the parliamentary debate on the matter, it was not merely the exemption itself that was controversial, but even more so the consequences and procedures for residents becoming non-resident in terms of double taxation agreements (DTA) or otherwise and the challenges posed by the non-alignment with exchange control residency.
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