Until recently, South African citizens were exempt from tax on foreign income if they were outside the country’s borders for 183 days a year, of which 60 consecutive days. However, the government withdrew section 10 (1)(o)(ii) of the Income Tax Act 58 of 1962. That is why South Africans who earn more than R1,25 million a year abroad have to pay up to 45% of that income in taxes since 1 March 2020. It sounds outrageous, but there are mitigating circumstances.
The National Treasury’s proposal does not mean that South Africans working abroad must pay double income tax. In South Africa, they are only taxed on income on which they do not pay tax elsewhere. The jurisdiction of the United Arab Emirates (UAE), for example, stipulates that foreigners do not have to pay income tax in the UAE, so many South Africans did not pay any tax on the income they earned there. It is such untaxed income that is now taxed in South Africa.
South Africa has agreements with many countries to protect an individual against double income tax. In certain cases, credit for double taxation can be granted if a person has paid tax abroad and in South Africa.
Business tax
The average business tax in the world is 23,79%. The highest business tax in the world was levied in 2019 at a rate of 55% in the UAE. Brazil (34%), Venezuela (34%), France (31%) and Japan (30,62%) also tax businesses at a high rate. Europe is the region with the lowest corporate tax rate (19,35%); it is lower than the average corporate tax in Asia (21,09%), America (27,21%) and Africa (28,24%).
Australia
Businesses in Australia are taxed on every dollar from the start. This means that small businesses do not pay no taxes as in many other countries.
If you run a sole proprietorship, you are taxed as an individual and the first $18 200 of your income per year is tax-exempt. Businesses with a turnover of less than $50 million pay 25% tax and those with a higher turnover pay 30%. However, there are concessions for businesses with a profit of less than $2 million per year. Value-added tax (VAT) is levied at 10% in Australia.
Canada
The general business tax in Canada is 28%, while the rate for small businesses is only 9%. A small business in Canada is considered a business with less than 100 employees; 98% of Canadian businesses fall into this category.
Each province has its own corporate tax system, and the handling of businesses, therefore, differs from province to province. In 2020, the combined provincial and corporate income taxes are fluctuating between 26% and 38%, depending on the province. Tax benefits are only available to Canadian-owned businesses.
New Zealand
Businesses in New Zealand pay 28% tax. Individuals from countries that do not have a tax agreement with New Zealand may have to pay double tax. However, South Africa has agreements with both New Zealand and Australia to avoid double taxation.
Zero or little corporative tax
In the following countries, businesses pay no taxes:
- Anguilla
- The Bahamas
- Bahrain
- Bermuda
- Cayman Islands
- Guernsey
- Isle of Man
- Jersey
- Turks and Caicos Islands
- Vanuatu
Most Caribbean countries also do not charge corporate taxes. In the following Eastern European countries, the business tax rate is below the world average of 23,79%:
- Hungary 9%
- Montenegro 9%
- Andorra 10%
- Bosnia 10%
- Bulgaria 10%
- Gibraltar 10%
- Macedonia 10%
- Moldova 12%
- Cyprus 12,5%
- Ireland 12.5%
- Liechtenstein 12,5%
- Albania 15%
