We all know by now that SARS want to take away part of the Section 10(1)(o) tax exemption. This exemption currently exempt South Africans from tax if they work abroad for more than 183 days in a 12-month period, provided that part of the 183 days is one continuous period of 60 days. Two significant revisions have been made to the initial proposal:
- an exemption of R1 million rand per year to alleviate the potential impact on foreign-based SA tax residents; and
- an extension of the implementation date to 1 March 2020 to give expats additional time to arrange their financial affairs.
The revision of the draft Taxation Laws Amendment Bill before tabling is subject to final approval.
I recently received several queries from South Africans working abroad from which it is clear that most people do not understand the proposed effect. Many think it applies to them, while it does not. It is only applicable to South Africans who are deemed to be South African tax residents.
The question is therefore: Are you a South African tax resident?
This question is not always easy to answer. If you have been working full time abroad for more than five years, then you should not be deemed to be an SA tax resident. If you have been out of SA for one year only, you could also qualify as a non-resident in respect of taxes, depending on your circumstances. However, no one will be deemed as a non-resident in respect of taxes if his/her spouse still lives in SA as he/she will still regard SA as the country to which he/she will return after his/her wanderings.
Ordinarily resident
In determining an individual’s ordinary status, the South African Revenue Service (SARS) refers to the various court cases that have interpreted ‘ordinarily residence’. For example, the concept has been interpreted as the country to which a person would naturally and as a matter of course return from his wanderings. In another case, it was held that a person is ordinarily resident in the place where he has his settled routine of life and where he regularly, normally or customary lives. There is also reference to where he is in fact settled into or maintains or centralises his ordinary mode of living with his accessories in social relations, interest and conveniences.
Throughout the court cases there are references to the permanency of ordinary residence, i.e. where the person’s permanent place of abode is, and that the residence must be settled and certain and not temporary. It must be the place you return to after your wanderings, and where your business and personal interests are closest.
The courts have held that the question whether a taxpayer may be regarded as being ‘ordinarily resident’ at a particular place during a particular period is one of degree, and one is entitled to look at the taxpayer’s mode of life beyond the particular period under consideration. The circumstances of the person must be examined as a whole, and the personal acts of the individual must receive special attention.
The question whether a person is ordinarily resident in a country is one of fact and each case must be decided on its own facts. It is not possible to lay down hard and fast rules. The following two requirements need to be present:
- an intention to become ordinarily resident; and
- steps indicative of this intention have been or are being carried out.
A person’s ‘ordinarily residence’ status is discerned from a combination of factors. The following factors will be relevant in considering the above two requirements:
- most fixed and settled place of residence;
- habitual abode, i.e. present habits and mode of life;
- place of business and personal interest;
- status of the individual in the country, i.e. immigrant, permanent residence, etc;
- location of personal belongings;
- nationality;
- family and social relations (schools, church, etc);
- political, cultural and other activities;
- periods abroad, purpose and nature of visits; and
- the frequency of and reasons for visits.
If you are not sure if you are an SA Tax resident, contact the tax consultant Fanus Jonck (tax@jonck.net) for advice.
