High-income South African expats are set to be taxed nearly half their income

Stringent regulations are set to come in place for South African expats who earn more than R1 million, with experts predicting that they could be taxed as much as 45% of their income by the government. According to a senior executive at Tax Consulting SA, these regulations will come into effect starting March this year.

The South African government appears to be trying every avenue to reduce the pressure on its treasury and revenue department, both domestically and internationally. The government introduced a tax hike early last year, primarily to mitigate the loss resulting from tax defaults across the country.

South African Revenue Services (SARS) – the government entity responsible for revenue collection and policy making – introduced stringent measures last year to ensure tax compliance, including the warning that defaulters will be called out on a public platform. SARS has already named some major defaulters.

Tax Consulting SA has been monitoring these policies, and offering its analysis on the pros and cons of these increasingly stringent regulations. Claudia Aires Apicella is the Head of Financial Emigration at Tax Consulting South Africa, and has predicted that SARS will now turn to expats to help boost its revenues.

As of 1st March this year, Apicella expects expats abroad with an income exceeding R1 million to be taxed as much as 45% of their income. The strategy is primarily aimed at individuals and firms that have simply moved abroad to avoid the increasing tax rates within the country. 

A number of these cases not only involve the act of leaving the country, but also display evidence of illegitimate activity. While some did not consider it necessary to submit tax returns in South Africa, others submitted zero tax returns to SARS. In some cases, individuals even indicated that they were unemployed on their tax returns while earning expatriate salaries,” said Apicella.

“This has prompted not only a law change, but also a stated SARS tax audit focus on those expatriates who have left and simply decided to ignore their taxes,” she added, continuing on to explaining the measures being taken by SARS. “With the commencement of the new law fast approaching, SARS has begun prosecuting taxpayers that are non-compliant and, in some cases, has the option to imprison the offender up to a period of two years.”