Sanchia Temkin
5 January 2009
Johannesburg — EXPATRIATES taking a lengthy holiday while on assignment in SA may find themselves falling into the South African tax net.
They could be at risk of paying double tax unless they understand the local tax laws, warn tax analysts.
People who remain within the country for more than 183 days in a row could be exposed to a tax liability, according to the income tax laws.
Stephen Marlin of the PricewaterhouseCoopers tax department said at the weekend that it was that time of the year when companies had slowed down, including international mobility departments. "Inbound expatriates have either completed their assignments or are taking a break to travel home before resuming their assignments in the new year."
Some expatriates, after completing their assignment or during their break, took the opportunity to spend the holiday time in SA, Marlin said.
Short-term expatriates usually took advantage of the income tax laws by working for 180 days to ensure that they complied with the immigration laws . But, Marlin said, risks arose for those expatriates who had completed their assignment within the 180-day permit period and who unintentionally overstayed by remaining in the country for a holiday.
"From a tax perspective, vacation days in SA can affect planning for expatriates who are from double taxation treaty countries," he said.
The expatriate was generally not subject to tax in SA unless exceeding 183 days in the country during the applicable time period specified in the respective treaty. This included working and nonworking days, and a holiday either after the completion or during an assignment break would affect the total days for the purposes of the double taxation agreement protection.
Marlin said nonworking days spent in SA on holiday during an assignment could result in an unexpected tax liability if the international department was not informed of the holiday plans in advance, which was usually the case.
Companies should always ensure holiday entitlements were adequately addressed in expatriate policies and that all expatriates and line managers were aware of the potential immigration and tax risks involved, he said.
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