South Africa currently has DTAs in place with 73 countries preventing double taxation of expatriates residing overseas.
The importance of expanding on the current tax treaty network can be supported by the latest Henley Private Wealth Migration Report which ranks South Africa among the top 10Â countries globally in terms of projected net outflows of millionaires for 2024, with a projected 600 net millionaire outflow.
Many South African expatriates choose to relocate to Isle of Man, Guernsey, Jersey and other Channel Islands and tax treaties negotiated with these jurisdictions during the expansion as announced in the Budget, will be beneficial to those South Africans.
Expats who form part of the global mobile community must not be under the misconception that one’s tax liability ends only because you live and work outside of South Africa.
South Africans who have left South Africa on a temporary basis and do not want to permanently cease tax residency under financial emigration, have the option to cease their tax residency on a temporary basis, by making use of the DTA provisions in countries that already have an existing agreement with South Africa.
In his Budget Speech Finance Minister Enoch Godongwana highlighted the importance for all South African taxpayers to remain fully tax compliant. This applies to all taxpayers, whether residing in South Africa or abroad.
The Minister’s remarks came against the backdrop of an estimated R16.7 billion shortfall in revenue collection in the 2024/25 financial year, against what was foreseen in February 2024. The South African Revenue Service (SARS) is expected to collect R1.846 trillion in revenue in FY2024/25.
What Is a Double Taxation Agreement?
Double tax treaties are agreements between two countries designed to avoid the problem of individuals or companies being taxed on the same income in multiple jurisdictions. In the absence of such agreements, South Africans who earn income from abroad may be liable to pay tax both in South Africa and the country in which the income is sourced. These treaties help mitigate the risk and tax liability by allocating taxing rights to the country of residence and/or the country where the income is generated, based on the taxpayer’s tax status.
The treaties cover critical types of transactions and forms of income, including interest, pensions, dividends, royalties, and capital gains, providing relief from double taxation.
The Expansion of South Africa’s Double Tax Treaty Network
South Africa’s tax treaty network has grown significantly in recent years with the intention, expressed in the Budget Speech, to address non-compliance, by further expanding the treaty network.
An expanded tax treaty network provides substantial benefits. A larger number of tax treaties means more opportunities for individuals to work and invest internationally with reduced concerns over double taxation. This can also make South Africa a more attractive destination for foreign workers, investors, and businesses, knowing that their tax liabilities can be more easily managed.
Key Benefits of the Expanded Tax Treaty Network
- Ceasing Tax Residency on a Non-Permanent Basis: DTA provisions provide a valuable opportunity for those abroad to cease their South African tax residency on a non-permanent basis, preventing them from being taxed by South Africa while they are living and working outside the borders of South Africa. This relief is favourable for those South Africans working and living abroad on a temporary basis. For as long as they reside abroad, the DTA may be applied as ongoing relief, with a need to be evidenced annually.
- Tax Relief and Certainty: Double tax treaties provide clear guidelines on which country has the right to tax specific sources of income. This ensures that South African taxpayers working abroad aren’t subjected to multiple layers of tax, significantly reducing their overall tax burden.
- Increased International Mobility: With fewer tax complications, South Africans can pursue international career opportunities, move abroad, or even invest without fearing significant tax penalties.
Overview of All DTAs and Protocols
Tax treaties play a pivotal role in making international mobility easier and more cost-effective, offering tax relief and clarity for individuals and businesses. South Africans have more opportunities to expand their international footprint without the worry of double taxation. As the treaty network continues to grow, the future looks bright for South Africans looking to make their mark on the global stage.
