Do You Pay South African Tax on Money From a Foreign Company?

Read this first

We are not tax advisers and this is not tax advice. What follows is a plain-language summary of what SARS itself publishes, with links so you can read the source rather than trust us. Tax is one of the few areas where being confidently wrong is expensive, so if any of this touches your situation, speak to a registered tax practitioner.

We have written it anyway because of a specific gap. Search this question and every result is aimed either at expats working abroad or at established freelancers with registered businesses. Almost none of it is written for the person this site is for: someone in South Africa, earning a few thousand rand a month from a foreign platform, who has seen a very large exemption figure quoted everywhere and wants to know whether it covers them.

The rule, in one sentence

South Africa taxes people on where they live, not on where their income comes from. SARS puts it this way: “South Africa has a residence-based tax system, which means residents are, subject to certain exclusions, taxed on their worldwide income, irrespective of where their income was earned.”

So money from a US platform, a UK agency or a European client is taxable here in the same way local income is. It does not matter that the payer has no South African presence, that the money arrived in dollars, or that it came through PayPal rather than a salary run.

The exemption everyone quotes, and why it probably is not yours

You will see R1.25 million cited constantly in answers to this question. It is real. It is also far narrower than most summaries of it imply.

The exemption sits in section 10(1)(o)(ii), and SARS describes it as meaning that “only the first R1.25 million of foreign employment income earned by a tax resident will qualify for exemption”. The part that gets dropped in the retelling is what has to be true to qualify. SARS describes the condition as rendering “services outside South Africa on behalf of an employer… for longer than 183 full days in any 12-month period as well as a continuous period exceeding 60 full days”.

Services outside South Africa. That is the hinge, and it is why this exemption almost certainly does not apply to remote work done from home here. If you are sitting in Durban doing the work, the services are rendered in South Africa, whoever employs you and wherever they are based. The exemption was written for South Africans physically working abroad, not for South Africans working remotely for foreign companies.

This is the most common misreading of South African tax we come across, and it runs in the direction that costs you. People assume they are covered up to R1.25 million when they are not covered at all.

Whether you are a tax resident

All of the above turns on being a South African tax resident, which SARS defines two ways. You are ordinarily resident if South Africa is “the country to which that individual will naturally and as a matter of course return after his or her wanderings”. Failing that, there is a physical presence test with day counts SARS publishes in full.

If you live here, work here and intend to stay, you are almost certainly a tax resident, and the worldwide income rule applies. Someone who is neither ordinarily resident nor meets the presence test is a non-resident, taxed only on South African-sourced income. That is a genuinely different situation, and not the one most readers of this page are in.

What this means practically

• Declare it. Foreign platform and freelance income is declarable, converted to rand, on your return. SARS does not carve out small amounts or platform work.
• Whether you must submit a return depends on your total income against the thresholds SARS publishes for that year of assessment. Check the current figures on the SARS site rather than on a blog, including this one.
• If you are not on a payroll, nobody is withholding for you. A local employer deducts PAYE before you see the money. A foreign platform does not. The tax is still due, so it has to come out of money already sitting in your account.
• Keep records from the first payment. Platform statements, payout dates, the rand amount that landed and the rate it landed at. Reconstructing a year of small foreign payouts afterwards is genuinely painful.
• Foreign tax already paid may be creditable against your South African liability. That is exactly the kind of thing to raise with a practitioner rather than work out from a web page.

Read the source

Everything above is drawn from two SARS pages, and both are worth reading in full rather than in summary:

• SARS — Tax and Non-Residents, for the residence-based system and the residency tests.
• SARS — Foreign Employment Income Exemption, for section 10(1)(o)(ii) and its conditions.

SARS updates these pages. If what you read there differs from what is written here, the SARS page is right and this one is out of date. Tell us and we will fix it.

Related

How the money physically reaches you, method by method, is in our payments guide. What the work pays before any of this applies is in what remote work actually pays.