Amendments to the South African Tax Act

SA Tax Act

Minister Mboweni tabled South Africa’s interim budget for Government’s fiscal year ending March 2021 on Wednesday, 28 October. At the same occasion, National Treasury published the 2020 Taxation Laws Amendment Bill in terms whereof Government will seek to enact changes to the South African Income Tax Act and other Tax Acts, as it does annually to refine the South African tax environment.

One of the notable changes this year involves the amendment to the Income Tax Act’s section 10(1)(o)(ii). That provision deals with foreign remuneration earned by South African tax residents working abroad. Section 10(1)(o)(ii) was in the news recently due to the controversial ceiling introduced in terms whereof only the first R1 million of foreign remuneration would be exempt from income tax in South Africa, whereas this exemption previously contained no limitation. (Readers may also be aware thereof that this threshold was recently increased to R1.25 million with amounts over and above this threshold alone being taxable in South Africa.) Ordinarily, in order for the exemption to apply, a South African tax resident is required to be outside of South Africa for a period of more than 183 days in a 12-month period of which 60 days must involve a continuous period.

In terms of the Amendment Bill, the 183-day period has been reduced to 117 days for any 12-month period beginning or ending between 29 February 2020 and 28 February 2021. The reason for the reduction in the required number of days spent outside of South Africa being reduced by 66 days specifically is not coincidental. Our readers will be aware thereof that South Africa’s strict lockdown period – to combat the effect of the Covid-19 pandemic – stretched the 66-day period commencing 26 March 2020 and ending 31 May 2020. Government, therefore, intends to provide for a concession to reduce the day-requirement in order to allow South Africans to still – notwithstanding the lockdown and as a once-off relief – qualify for the exemption in section 10(1)(o)(ii).

For more information please contact the writer, De Wet de Villiers from the firm AJM Tax at [email protected]