- Bringing an all-round view on the issue of taxation of remote workers peculiar to South Africa
It is important to talk about Tax for Remote Workers in South Africa as it has recently become clear that an increase in demand for international remote working arrangements has invited different tax implications for both employees and employers.
According to Jenny Klein and Megan Stuart-Steer, legal associates for ENSafrica, tax consequences vary depending on whether employees work in South Africa for a foreign employer or abroad for a South African employer.
What is Remote Work?
In an article by the founder of Taxmobile.Online; Remote work is the practice of employees doing their jobs from a location other than a central office operated by the employer.
Such locations could include an employee’s home, a co-working or other shared space, a private office, or any other place outside of the traditional corporate office building.
He further submitted in his LinkedIn Newsletter article “Taxation of Remote Employees and implication for MNEs in Nigeria” that:
Remote working from foreign jurisdictions has become increasingly popular during the Covid-19 pandemic.
Despite the lockdown rules being relaxed in most jurisdictions, it appears that employers should not expect the workplace to return to the way it was before the pandemic.
Tax for Remote Workers in South Africa: More Perspective
The legal experts then went ahead to reveal that certain key issues are common to these two scenarios.
One of the issues is whether and in which jurisdiction(s) employees’ tax withholding and tax compliance obligations may arise.
It is said that factors such as the location and the period that an employee has worked are determinants.
Another determinant is a change in the employee’s tax residence status as a result of the remote working arrangement, and also the provisions of any double tax treaty agreed upon by South Africa and the foreign country.
It was further explained that in a situation where remuneration is paid to an employee by different employers in different jurisdictions, and those jurisdictions require the withholding of employees’ tax, this would lead to a dual withholding obligation for the employer and would mean a loss for the employee.
Tax for Remote Workers in South Africa also has to do with the issue of employees relocating. Addressing this, ENSafrica mentioned that employees will have to decide if they want to quit being tax residents of a particular jurisdiction due to the relocation and how soon that will be happening.
Corporate Income Tax Point of View
According to legal experts, in a situation whereby an employee works abroad, an important factor to consider from a corporate income tax point of view is to determine if the activities of that employee in the foreign country could lead to a taxable presence for the employer.
Finding out if such a taxable presence may arise for the employer would largely depend on factors such as; the role and activities of the employee, the domestic law of the country concerned, as well as the provisions of any double tax treaty finalized between the relevant countries, if applicable.
It is pertinent to note that Tax For Remote Workers In South Africa is novel to tax administration in the country as income tax is tied to residency but South Africa must now in the face of paucity of funds, look for innovative ways to capture the remote workspace in the tax net.
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