The amendment to the foreign employment income exemption that was introduced in 2019 is effective from 1 March 2020. However, the initially proposed exemption limit of R1 million will increase to R1,25 million, according to South Africa’s 2020 budget.
Treasury is aware that clients are being advised to emigrate with the sole purpose of circumventing this tax consequence (i.e. financial emigration). However, government wants to encourage South Africans who work abroad to retain their connection with the country. In an aim to achieve this, the concept of financial emigration will be phased out by 1 March 2021 and be replaced by a verification process.
For residents who work abroad, the intention is to remove exchange control treatment for individuals. The plan is to allow these individuals more flexibility, provided their funds are legitimately sourced and that these individuals are in good standing with SARS. Individuals transferring more than R10 million abroad will be subject to more stringent verification processes. These transfers will also trigger a risk management assessment.
The phasing out of the concept of financial emigration will also affect the ability to access retirement funds due to emigration. It is proposed to revise and amend the rules which govern the exception to access retirement funds upon emigration so that these rules are in line with the overall amendments.
No further details are available at the moment. We will keep you updated as soon as National Treasury releases new information.
You are welcome to contact Fanus Jonck at tax@jonck.net for tax advice.
