Home Affairs may be shooting SARS in the foot

Proposed work visa changes from the Department of Home Affairs look to be setting up South Africans working overseas with a raw deal – and may end up convincing many of them to permanently cut ties.

This could then create an even bigger tax headache for the South African Revenue Service (SARS) which is already under pressure to collect as much tax as it can to help plug the country’s growing budget deficit.

According to legal experts Bronwin Human and Delano Abdoll at Tax Consulting South Africa, the key issue lies in how the new proposed remote work visa will function in terms of taxes.

Under the proposed new laws, South Africa’s Immigration Regulations will be changed to allow foreign workers in South Africa to work for foreign companies on a ‘digital nomad’ visa for a period of six months without having to register with the SARS.

This is provided that the foreign workers earns no less than R1 million a month, according to the draft regulations.

In contrast to this, the legal experts noted that any South African expatriate working abroad has to pay full tax on their earnings over R1.25 million, as well as being subject to onerous tax administration requirements.

“This change by the DHA comes across as blind to those South African expatriates who have not financially emigrated or followed other routes to formalise the cessation of their South African tax residency with SARS,” the group said.

“These expatriates work and live abroad, (but) they must still contribute to the fiscus and the ‘running costs’ of South Africa; (meanwhile) foreigners working remotely within South Africa – who reap the benefits of the expatriates’ tax – do not contribute at all.”

Tax Consulting said that this could very well lead to an increase in the number of expats who take their international trekking a step further and fully cease their tax residency in South Africa – while also making it a more likely option for any South Africans planning on working abroad in the future.

This will have a direct impact on SARS and tax revenue collection in the country, it said.

Stepping on SARS’ toes

Tax Consulting raised questions about the DHA’s authority to unilaterally introduce laws that may impact SARS and the country’s tax base.

“South Africa’s robust tax legislation framework has undergone years of refinement by the National Treasury, in furtherance of increasing South Africa’s revenue collection, and improving the levels of tax compliance.

“By effectively passing a tax law to the benefit of high-earning foreigners, the DHA may be overstepping its jurisdiction and encroaching into the domain of the National Treasury,” it said.

“Such regulatory changes should undergo thorough consultation and review to assess their implications for tax policy and administration, contributing to regulatory inconsistency and undercut the effectiveness of tax laws,” the group said.

Read: Game changer for work visas in South Africa launching this week