Proposed amendments in South Africa’s tax law may impose stricter tax requirements for remote workers and their employers.
South African Revenue Services (SARS) has shared a draft of the proposed tax administration bill [pdf], that will seek to change how remote workers pay taxes. One of the proposed changes includes removing the distinction between remote and non-remote workers and requiring employers of South Africa-based remote workers to deduct pay-as-you-earn (PAYE) tax.
Currently, remote workers pay taxes by declaring their earned income during the tax season, which is usually between the beginning of July and the end of October every year. But SARS has valid concerns that this method of tax collection leads to revenue losses. By switching to a Pay As You Earn (PAYE) model for remote workers, the revenue authority can collect tax deductions directly from employers and increase revenues.
In its justification for the proposed new law, the treasury said that requiring PAYE tax would “level the playing field between resident and non-resident employers and ensuring alignment with skills development levies and unemployment insurance contributions.”
To efficiently withhold the PAYE tax of South African staff, foreign companies would need to apply for and receive a SARS income tax number, register a branch company within South Africa, and register for Skills Development Levy (SDL) and Unemployment Insurance Fund (UIF) contributions. Some labour and tax experts state that these complex demands might prevent international companies from considering South African personnel for remote work opportunities.
South African remote workers are already facing scrutiny by foreign employers. The country’s rolling blackouts, also known as loadshedding, have led to employers questioning their likely impact on the productivity of SA-based remote staff. The new regulations will add to the challenges and make it even harder for workers to be considered for remote opportunities.
The proposed amendments are currently open for commentary from the general public, with that process expected to conclude on 31 August 2023, after which the final bill will be released for tabling in parliament.