The budget for 2020-2021 includes a measure that the foreign remuneration exemption would be increased from R1 million to R1.25 million per year from 1 March 2020.
Under the new system proposed by the budget measures, emigrants and residents who are natural persons would be treated identically. Additional restrictions on emigrants, such as the requirement to only operate blocked accounts, would be repealed. The intention is to allow individuals working abroad more flexibility provided that they are in good standing with the South African Revenue Service and funds are legitimately sourced. However, individuals who wish to transfer more than R10 million offshore would be subjected to a more stringent verification process. Also, the practice of allowing individuals to withdraw funds from their pension preservation fund, provident preservation fund, and retirement annuity fund upon emigrating for exchange control purposes would be reviewed. Any resulting amendments would be effective 1 March 2021.
Since the announcement of the changes to the foreign remuneration exemption in July 2017, South African tax residents working abroad have sought advice on ways in which they can minimise the impact of the amendment on their disposable income. In many instances, employment contracts have been negotiated on the basis that employees will not be liable for tax in South Africa on their employment income for foreign services. Many have incorrectly concluded that breaking ties with South Africa through emigration is the only viable option for them to meet their objective of breaking South African tax residency. In order to stem the tide of emigrations, National Treasury has decided to take measures to encourage South Africans to maintain ties with South Africa by increasing the remuneration exemption to R1.25 million and phasing out the concept of emigration.
Read a February 2020 report [PDF 381 KB] prepared by the KPMG member firm in South Africa
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.