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Home Publications COVID-19 National lockdown: are there tax implications if you remain in sa for an extended period of time?

National lockdown: are there tax implications if you remain in sa for an extended period of time?


The Draft Disaster Management Tax Relief Administration Bill (the “Draft Bill”) was released for public comment on 1 April 2020. It provides inter alia that for purposes of specific provisions of the Tax Administration Act No. 28 of 2011 (“the TAA”), the period of national lockdown will be regarded as having no legal effect.

In certain circumstances, the physical presence of an individual in South Africa in excess of legislated periods of time could give rise to such person triggering significant South African tax liability. Neither the Draft Bill nor the Explanatory Memorandum issued in respect thereof provides clarity in relation to the impact which the period of national lockdown may have in this regard.

Potential impact on tax residence

Firstly, the national lockdown may have adverse South African tax implications for individuals who are not tax resident in South Africa, but have been under national lockdown in South Africa. This is on the basis of the so-called “physical presence” test of tax residency contained in section 1 of the Income Tax Act No. 58 of 1962. In terms of this test, a person may be resident for tax purposes in South Africa if he/she is physically present in SA:

  • for more than 91 days in aggregate during a year of assessment as well as more than 91 days in aggregate during each of the 5 years preceding such year of assessment; and
  • for a period or periods exceeding 915 days in aggregate during those 5 preceding years of assessment.

The above may be of particular relevance to individuals who recently ceased to be tax resident in South Africa, but now find themselves in South Africa for the period of the national lockdown.

Potential application of the expatriate exemption

Since 1 March 2020, a South African tax resident working abroad is exempt from South African income tax in respect of the first R1.25 million of foreign employment income earned in terms of the so-called “expatriate exemption”. This exemption would only apply, however, if the South African tax resident inter alia:

  • spends more than 183 days in a 12-month period abroad; and
  • spends a continuous period exceeding 60 full days abroad during that 12-month period.

An individual who derives foreign employment income and ordinarily spends the majority of the year offshore may, due to the national lockdown, unexpectedly spend significantly more time in South Africa and accordingly not meet the requirements of the expatriate exemption.

Should the above provisions be unaffected by the period of national lockdown, the resulting tax implications may be unduly harsh for some taxpayers. In the current economic climate, it is important for National Treasury to provide clarity in relation to the above in favour of such taxpayers.

Author: Alexa Muller, Tax Specialist, PKF Cape Town