Question NW569 to the Minister of Finance

Reply:

1. No.

Employees and businesses operating in South Africa are generally subject to taxation in SA on the income derived from those SA activities. This is because the originating cause of the amount being received as income is the physical work that is undertaken to generate that income, which is located in SA (known as income from an SA source). However, most jurisdictions, including SA, also tax persons based on their being resident in those jurisdictions (known as residence-based taxation).

This could result in double taxation for the person concerned, as income may be taxed in SA based on that income being from an SA source while also being taxed in the jurisdiction where the person is a resident. To alleviate the problem of double taxation, SA has entered into a network of 79 tax treaties (23 jurisdictions in Africa and 56 jurisdictions in the rest of the world, mostly with SA’s main trading partners). Although the treaties are based on the OECD and UN models, there are variations between them depending on their age and the outcome of the negotiations between SA and the other jurisdictions. A list of the jurisdictions with which SA has tax treaties is available on the SARS website.

Under SA domestic law, SA will have the right to tax the employment income generated from the services rendered in SA. However, one of the rules generally found in a tax treaty, which will take precedence over domestic law, is that if the remote worker is in SA working for a foreign employer for less than 183 days in a twelve-month period, the employee’s country of residence will have the sole right to tax that income. No tax will be payable in SA and the remote worker should not register with SARS for income tax purposes. There are some exceptions to this rule, such as if the remote worker’s foreign employer has a tax presence (generally, a fixed place of business known for tax purposes as a “permanent establishment”) in SA; or if a South African business carries the cost of the remote worker’s employment by means of, for example, a cost recharge or service fee. In such cases, SA will have the right to tax the remote worker from day one.

Where the remote worker is in South Africa for more than 183 days in a twelve-month period, South Africa has a right to tax the remote worker on the income derived from working in SA, even if the foreign employer has no connection to SA. The remote worker will, therefore, have to register with SARS for income tax purposes and pay tax in SA on that income. As the foreign employer will not be deducting employees’ tax, the remote worker will be required to pay provisional tax every six months. The relevant provisions for the relief from double taxation in the employee’s jurisdiction of residence, set out in the tax treaty or the legislation of the jurisdiction of residence, will then come into play.

If there is no tax treaty between SA and the remote worker’s home jurisdiction, SA will tax the remote worker on the income generated in SA from day one.

A similar but not identical analysis applies if the remote worker is not an employee but instead renders independent personal services, such as a consultant with multiple foreign clients.

2. (a) The 1st phase of the SARS Traveller Management System was implemented during November 2022. As part of the implementation plan, the Communication and Marketing strategy included extensive public and private stakeholders’ engagements with, amongst other, the Department of Tourism; Department of Sports, Arts and Culture; Inter Ministerial Consultative Committee (IMCC); Border Technical Committee; Department of International Relations and Cooperation (DIRCO); Financial Intelligence Centre (FIC); Continental and Regional structures such as Southern African Development Community (SADC) and African Union (AU); WesGrow; Tourism Business Council of South Africa (TBCSA); and the Southern Africa Tourism Service Association (SATSA).

Furthermore, as part of making it easy for travelers to comply with their legal obligation, SARS also embarked on education and awareness initiatives such as a Traveller management webinar, digital advertising platforms, and a Traveller management webpage. Post implementation feedback sessions were also held with public and private stakeholders as part of continuous improvement.

The system was rolled out to all airports by September 2023 followed by specific land (Beitbridge and Skilpadshek), and seaports (Cape Town harbour) as pilot implementation. We are in process of finalizing roll-out at remaining ports. In order to make compliance easier a mobile app was implemented in December 2023, and we are currently developing additional functionality such as an online payment module, temporary import permits and the registration of goods for reimportation.

At this stage completion of the electronic Traveller Declaration is voluntary, and once the necessary legal provisions have been approved, it will be enforced as mandatory during the course of 2024.

b) The online Traveller declaration system enables travellers entering or leaving the Republic to meet their legal obligation to declare goods including currency in their possession before travelling and paying applicable taxes. The online declaration system is accessible through SARS website, Mobi-App and mobile device applications. Through this approach,

• The system creates a seamless process for compliant travellers at ports of entry/exit through providing the facility for pre-arrival automated declarations supported through integrated risk management and 3rd party data systems.
• Provides for the possibility of a coordinated border or whole of government approach to strengthen controls to detect and deter illicit activities such as illicit financial flows, prohibited and restricted goods, etc.
• Create awareness and provide clarity to build a culture of voluntary compliance.