Expatriate tax ebook - South Africa

Where foreign employment continues to exist and part of the expatriate's duties are performed outside of South Africa, any employment income received in respect of the foreign duties will remain outside the charge of South African tax, provided the employee is not tax resident in South Africa.

An important exclusion to tax on fringe benefits applies where employers provide free or cheap accommodation to employees that are away from their usual place of residence. Prior to the recent amendments, employers could provide accommodation to an employee free of tax for the period that they were away from their usual place of residence whilst performing duties in South Africa. The tax free nature of this benefit has resulted in significant tax advantages for expatriate employees and has simultaneously lowered their cost of employment.

Tax free accommodation provided to expatriates is now limited to the first 24 months of their assignment in South Africa. This tax free status is further subject to the requirement that the relevant employee must not have spent more than 90 days in South Africa during the 12 month period immediately preceding his date of arrival. This is an anti-avoidance provision aimed at addressing situations where contracts are entered into for a period of 12 months and then renewed one month after the previous contract has expired.

The consequences of the above legislation are that expatriates enjoying tax free accommodation in South Africa on 1 March 2008 will continue to enjoy the benefits to the extent that they have not been in South Africa for a period exceeding 12 months. Expatriates that have already enjoyed the benefit for a period in excess of 12 months on 1 March 2008 would lose the benefit, but no retrospective adjustment is required. Once the 12 month period has expired, expatriates will be treated the same as any other South African employee.

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Last updated 16 June 2011

This information has been provided by Grant Thornton South Africa, a member firm within Grant Thornton International Ltd, and is for informational purposes only. Neither Grant Thornton South Africa nor Grant Thornton International Ltd can guarantee the accuracy, timeliness or completeness of the data contained herein. As such, you should not act on the information without first seeking professional tax advice.

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