Many South Africans who work abroad assume that exempt foreign income means there is nothing to declare and nothing to file. The exemption is claimed on a tax return. SARS does not apply it on your behalf, and your obligation to submit returns continues after you leave the country.
Simon’s story shows how quietly the problem builds, and how a taxpayer who never owed a cent in South African tax on foreign income can still end up facing a demand for hundreds of thousands of rands. Simon is a fictionalised character based on actual case studies, to protect his identity.
Simon’s position: working abroad as a South African since 2006
Simon had been working in the United Kingdom since January 2006. He had a permanent home in the UK and had a full-time contract there.
His wife was still in South Africa, and their official home was in South Africa. That made him, what SARS classifies as ordinarily resident in South Africa.
When Simon’s contract was done, he returned to his family in South Africa.
How exempt foreign employment income works
Since 2001, if a South African worked abroad and earned a foreign income, they were exempt from tax on their total foreign earnings. But in 2020, that rule changed. SARS implemented a threshold of R1 million. If you earned up to R1 million, you were exempt from tax on your foreign income.
In 2021, the amount was increased to R1.25 million, backdated to 1 March 2020.
What went wrong
Simon was under the impression that he was automatically exempt and did not have to declare the foreign income. So, he never submitted returns since 2006.
Then, out of the blue, he received an email from SARS, and a final letter of demand for tax owed to SARS of over R750 000. This was after SARS auto-assessed him. The charges consisted of income-assessed tax and as well as non-compliance fees.
How FinGlobal resolved it
He approached FinGlobal, and we assisted him in submitting all the returns since 2006 and declaring his income, so that he would not be liable for paying tax on it in South Africa. He had already paid tax on his foreign income in the United Kingdom and provided the documentation to confirm this.
We successfully submitted corrections for him and ensured that he was not liable for tax on his income, as he earned below the threshold.
Get help with your expat tax in South Africa
If you are in a similar position, the position is fixable. FinGlobal has helped thousands of South African tax residents and non-residents bring their tax affairs up to date.
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