Paul Gering | Tax Partner, PKF Durban

Prior to 1 March 2020, South Africans who worked offshore and met the requirements of the “days tests”, as commonly referred to, qualified for a full exemption on their foreign remuneration.

The National Treasury proposed that from 1 March 2020, the exempt remuneration be capped at R1 million. After much debate in the public hearings, this was ultimately increased to R1.25 million.

The concerns raised in those debates was that capping the exempt income would encourage taxpayers to cease residency and break their links with South Africa. The consequences of this were downplayed by the National Treasury at the time.

Recent SARS statistics reveal that some 38,000 South African Tax residents are ceasing to be tax residents, resulting in a reduction in taxpayers and an overall reduction in tax collections of some R3 billion.

More importantly, some 1,700 tax paying millionaires also ceased tax residency in 2023 with an estimated loss of some R5 billion in taxable income.

If one considers the tale of the “Golden Goose”, the consequences are much dire – these taxpayers, who no longer fall within the South African tax base, were the entrepreneurs and job creators who contributed significantly to the fiscus through various taxes.

The richest man in the world – Elon Musk – worth some USD 425 billion in 2023, was a South African. Imagine the potential tax revenues that could have been generated here if the conditions were conducive to his business ventures in South Africa.

We have lost many good, talented and extremely successful South Africans due to the policies of old, the policies of today and the general economic outlook of South Africa.

Perhaps the notion of whether some South Africans would have remained tax resident had this capping exemption on their offshore remuneration not been introduced, needs to be re-evaluated by National Treasury.