The Department of Home Affairs’ (the DHA) recent amendments to Immigration Regulations are likely to spark controversy among South African taxpayers, especially expatriates working abroad, who are still diligently fulfilling their South African tax obligations. These amendments, which are aimed at enabling remote working in South Africa, seem to grant preferential tax treatment to high-earning foreigners over local and expatriate South Africans.

Unwarranted Interference?

The DHA's amendments appears to extend an invitation to foreigner workers, earning above a R1-million, to work remotely in South Africa for up to 6 months within any 12-month period, while not requiring them to register for or pay tax to SARS. In contrast, expatriates working abroad pay full tax on their earnings in excess of R1.25-million, as well being subject to onerous tax administration requirements.

The amendments raise questions about the DHA’s authority insofar as passing laws which have serious effects on the tax base. South Africa’s robust tax legislation framework has undergone years of refinement by National Treasury, in furtherance of increasing South Africa’s revenue collection, and improving the levels of tax compliance. By effectively passing a tax law to the benefit of high-earning foreigners, the DHA may be overstepping its jurisdiction and encroaching into the domain of National Treasury.

Undermining SARS’ Tax Collection Abilities

SARS’ authority to administer and collect tax, appears to be undermined by the DHA publishing the “Draft Second Amendment to the Immigration Regulations, 2014” on 8 February 2024, which states that:

“work conducted, as contemplated in section 11(2) of the Act, for a foreign employer on a remote basis: Provided that—

(i)               such foreigner earns no less than the equivalent of R1 000 000.00 (One-Million Rand) per annum; 

(ii)              if the visa is issued for a period not exceeding 6 months within a 12-month period, the foreigner will not be required to register with the South Africa Revenue Service; and

(iii)            if the visa is issued for a period longer than 6 months within a 12-month period, the foreigner must register with the South Africa Revenue Service…” (our emphasis)

The juxtaposition between the stringent approach adopted by SARS towards expatriates leaving South Africa to work abroad, and the DHA’s amendments affecting foreigners entering South Africa to work remotely, presents a potential inequality amongst taxpayers. This seemingly contrasting stance between government departments further adds to the view that there is an apparent lack of cohesion in regulatory frameworks, and raises questions regarding the equitable treatment of expatriates in relation to tax compliance obligations. 

Unilateral Decision Making

The decision by the DHA to amend Immigration Regulations, presumably without consultation with National Treasury or SARS reflects a lack of coordination and oversight. Such regulatory changes should undergo thorough consultation and review to assess their implications for tax policy and administration, contributing to regulatory inconsistency and undercut the effectiveness of tax laws. If SARS were indeed consulted with, it would be interesting to note the minutes of such consultation, being held for the public interest.

This change by the DHA come across as blind to those South African expatriates, who have not financially emigrated, or followed other routes to formalise the cessation of their South African tax residency with SARS. Notwithstanding that these expatriates work and live abroad, they must still contribute to the fiscus, and the "running costs” of South Africa. This is in contrast to foreigners working remotely within South Africa, who reap the benefits of the expatriates’ tax, and do not contribute at all. We might see an increase the cessation of tax residency of those expatriates currently abroad, and those planning on working abroad in future. 

Written by Bronwin Human, Tax Attorney at Tax Consulting SA; and Delano Abdoll, Legal Manager: Cross-Border Taxation at Tax Consulting SA