An analysis of the taxation of inbound and outbound expatriates in South Africa

Abstract

Globalisation trends have resulted in increased mobility of resources and alignment of international business processes without the alignment of international tax systems. The trend has contributed to the expansion of the income base of the South African Revenue Service through foreign nationals (inbound expats) finding work opportunities in South Africa due to their scarce skills and to South African permanent residents (outbound expats), temporarily engaging in opportunities abroad. The main objective of this study is to analyse the taxation in respect of inbound and outbound expatriates to determine whether they are taxed fairly/reasonably when compared to each other and in terms of the OECD Model Tax Convention. Furthermore, this study aims to determine if the two regimes could be aligned or harmonised to reduce unjustifiable differences or potential inequalities between the two regimes. Therefore, a literature study was conducted to evaluate the legislative frameworks and establish the comparison. The comparison yielded few differences between the taxation of inbound and outbound expatriates but found that the differences that do exist are mainly due to the application of the difference in residency and the existence of Double Taxation Agreements (DTAs).