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Foreign Income and Expat tax


The below is only applicable if you are a South African Tax resident and have any of the below mentioned income streams.

Foreign income consists of any earnings that did not originate in South Africa; meaning the property or investment is held within another country’s market or jurisdiction, and would consist of

Foreign income received from :

    • Salaries (Section 1)
      • Living in South Africa
      • Expat – living overseas for work, but still a South African citizen, and South Africa is still your “home” ?
    • Other earnings (Section 2)
      • Fees for services
      • Goods

Each of the above gets treated differently for South African Tax and must be converted to Rand value, based on the exchange rate as at 28/29 February (or the financial year end of a company).


1) Foreign salary :

This is where things can get complicated and our vision is that this section will assist you to understand your tax situation a lot better. For both of the below scenarios, SARS and the Tax Act state that the individual should register for Provisional tax.

Please see our article on provisional tax for more information :

1) Individual earning a foreign salary, but primarily lives in South Africa and NOT in the foreign country for more than 183 days :

Another 2 scenarios can exist :
i. The foreign company does withhold or pay taxes on your behalf

a) Proof of this will be needed when submitting your tax return.
b) Please see the example below in the Expat section which will explain the foreign tax credit.

ii. No tax is being withheld or paid.

There is no rebate or special reductions in the taxable income for this type of scenario.
Your salary must be converted to Rand and declared as foreign income on your tax return.
On your tax return, you can claim any foreign tax (converted to Rand) which was withheld OR paid to the foreign State.

Work from Home expenses can be claimed and you can find more on this here :

2) Expats :

Some conditions are to be met, before the R1,250,000 rebate of Sec. 10(1)(o)(i) can be applied :
• Out of South Africa for more than 183 days – consecutively.
• Still a South African citizen and tax resident
• South Africa is “STILL your Home”

Your salary and any foreign taxes are also converted to Rand value and in your income tax return, added as other foreign income.
NB: As of the date of writing this, there is an error under the tax return for sec. 10(1)(o)(i) income block and its corresponding foreign tax rebate.

Example in calculating taxes :
This example excludes and does not consider other income received.
Annual Foreign Salary : $100,000
Foreign Taxes paid : $20,000
Assumed Exchange rate : R15 to $1
Annual Salary in Rand : R1,500,000
Foreign taxes in Rand : R 300,000

Salary : R1,500,000
Sec 10(1)(o)(i) deduction of : R1,250,000 (EXPATS ONLY)
Taxable portion of income R 250,000
And then calculated at the applicable tax rate for earning R250,000.
For individuals who earn a foreign salary whilst in South Africa, their taxable salary will be R1,500,000 in total and taxed at the applicable rate for this income tax bracket.

The foreign tax credit is calculated based on 2 different calculations :
a) To determine the maximum foreign tax amount allowed – The maximum allowable deduction of foreign tax, from the South African tax. .

The foreign tax credit cannot :
• Cause a refund
• Be more than the South African tax

Sec 6 Quat (1B)(a) :
Foreign tax cap = Total taxable foreign income X SA Tax
                                   Total taxable income ALL sources (local and foreign)

All taxable income means :
• Rental profit
• Salaried income
• Interest received
• Any other income not mentioned

AFTER deductions such as (and not limited to) :
• Retirement annuity
• Logbook / travel expenses
• Home Office
• NOT medical as medical expenses (incl. medical aid) have a tax reduction effect, not a reduction in taxable income.

b) The allowable portion of the foreign tax credit.

This is the portion that will be deducted from the South African tax calculated after all income and all allowable expenses are considered.
This means that after all your income was added up
• Taxable portion of salaries
• Rental profit
• Interest received
• Other income received
AFTER deductions such as (and not limited to) :
• Retirement annuity
• Logbook / travel expenses
• Home Office
• NOT medical as medical expenses (incl. medical aid) has a tax reduction effect, not a reduction in taxable income.

Allowable portion of foreign taxes = Foreign tax X Nett taxable income
Gross income (before deductions)


2) Other Foreign Income :

This would include (and NOT limited to) :

• Service fees charged to a company that is based in another country.
• Earning rental income from a property in a foreign country
• Sale of goods by a South African (individual or Company)

Whether this income is received by a South African Individual or Company, makes no difference in the INCOME TAX treatment.

• VAT will be 0% on these services delivered – ZERO-rated VAT.
• VAT registration MUST be done if the service fees or sales of goods exceed, R1,000,000.

• The revenue will still be declared on the VAT return, but under ZERO rated and NO VAT would be payable on the foreign amounts received.

The amount declared must be converted to Rand.
An individual generating the above income must be registered for Provisional tax.

There are no special deductions except those deductions applicable to :
• For :

• Generating the fees
• Sale of the goods
Standard business expenses can be deducted :

• Accounting fees
• Bank fees
• Rent or home office expenses – as applicable
• Utilities
• Salaries
• Etc

• Directly related to the property – if rental income is received.

– Salim Khan

Please click here to read related article on Foreign Investment Taxt treatment

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