Changes have been proposed to the immigration rules to allow for a remote working visa for foreigners working in South Africa for a foreign employer in certain circumstances.
The Department of Home Affairs issued the Draft Second Amendment of the Immigration Regulations 2014 ("Draft Regulations") on 8 February 2024 for public comment. Written submissions must be made by 29 March 2024.
Among other changes, the Draft Regulation provides for a visa in respect of work conducted (as contemplated in section 11(2) of the Immigration Act, 2002) for a foreign employer on a remote basis, provided that the foreigner earns "no less than" the equivalent of R1 million per annum (although it is not clear whether this should instead refer to "no more than" R1 million per annum).
In addition, the Draft Regulation provides that if the visa is issued for a period not exceeding 6 months within a 12-month period, the foreigner will not be required to register with SARS. However, if the visa is issued for a longer period, the foreigner must register with SARS.
This proposal poses several questions from a tax perspective. Firstly, it is not clear how this dispensation whereby an individual will not be required to register with SARS as a taxpayer will interact with the registration provisions of the existing tax legislation. Presumably, amendments will have to be made to the Income Tax Act to provide for this and align with the immigration rules. It is also unclear how this visa will impact the new tax rules requiring non-resident employers with a permanent establishment in South Africa to register for and withhold PAYE from the remuneration of their employees working in South Africa. Where PAYE is deducted, the employees would be required to be registered as taxpayers with SARS regardless of the time spent in South Africa. However, non-resident employers should presumably not have any PAYE withholding obligations if their employees are not required to register as taxpayers in terms of their remote working visa.
In many cases, South Africa's double tax treaties would exempt an individual's employment income from tax where the individual is present in South Africa for less than 6 months, as long as certain other requirements are met, so those employees would not be required to register as taxpayers in any event.
The interaction of this remote visa proposal with the current tax legislation should be clarified, both for the foreign employees and their employers. ENS will be submitting comments in relation to the tax aspects of this proposal to suggest that the tax rules need to be aligned. However, it is worth noting that no such tax amendments were foreshadowed in the Budget Speech in February.
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