Tax implications of remote working in South Africa

[BusinessTech]

Tax implications of remote working in South Africa

Due to the impact of the Covid-19 pandemic, governments imposed restrictions on individual travel. This resulted in many companies changing their work model to accommodate employees working from home.

 

[Neville]

What if one works remotely for a foreign company and one gets paid in another currency?
How does that effect your tax return?
I'm guessing foreign companies do not issue IRP5s...?

 

[Cius]

What if one works remotely for a foreign company and one gets paid in another currency?
How does that effect your tax return?
I'm guessing foreign companies do not issue IRP5s...?

Having this issue now as I am interviewing with a lot of international companies. Essentially you have to set up a business, and invoice them monthly. You change to being a provisional tax payer. Fairly common already for most of the companies I am dealing with. My bigger concern is that as it is a business to business relationship termination almost seems easier.

You also need to check what the stance is on paid leave etc. Some include some leave days despite it being a business to business relationship and otherwise treat you as an employee. Others expect you to take unpaid leave so you have to build that in to the rate you charge. Just watch out for that. I was gunning for something like that but after seeing the issues that can arise I am no longer sure about it. Its a lot easier if they have a local office that can employ you locally but few have that.

 

[derp90]

Having this issue now as I am interviewing with a lot of international companies. Essentially you have to set up a business, and invoice them monthly. You change to being a provisional tax payer. Fairly common already for most of the companies I am dealing with. My bigger concern is that as it is a business to business relationship termination almost seems easier.

You also need to check what the stance is on paid leave etc. Some include some leave days despite it being a business to business relationship and otherwise treat you as an employee. Others expect you to take unpaid leave so you have to build that in to the rate you charge. Just watch out for that. I was gunning for something like that but after seeing the issues that can arise I am no longer sure about it. Its a lot easier if they have a local office that can employ you locally but few have that.

I don't think you need to set up a business if you're a sole proprietor. In fact, I think it's better tax-wise to NOT set up a business.

 

[Harmonic]

Having this issue now as I am interviewing with a lot of international companies. Essentially you have to set up a business, and invoice them monthly. You change to being a provisional tax payer. Fairly common already for most of the companies I am dealing with. My bigger concern is that as it is a business to business relationship termination almost seems easier.

You also need to check what the stance is on paid leave etc. Some include some leave days despite it being a business to business relationship and otherwise treat you as an employee. Others expect you to take unpaid leave so you have to build that in to the rate you charge. Just watch out for that. I was gunning for something like that but after seeing the issues that can arise I am no longer sure about it. Its a lot easier if they have a local office that can employ you locally but few have that.

This is the risk you take to earn in a foreign currency sadly.

 

[Neville]

Having this issue now as I am interviewing with a lot of international companies. Essentially you have to set up a business, and invoice them monthly. You change to being a provisional tax payer. Fairly common already for most of the companies I am dealing with. My bigger concern is that as it is a business to business relationship termination almost seems easier.

You also need to check what the stance is on paid leave etc. Some include some leave days despite it being a business to business relationship and otherwise treat you as an employee. Others expect you to take unpaid leave so you have to build that in to the rate you charge. Just watch out for that. I was gunning for something like that but after seeing the issues that can arise I am no longer sure about it. Its a lot easier if they have a local office that can employ you locally but few have that.

Thanks for the heads-up on the leave situation..good tips! In general what you describe though is like a normal "contractor" type scenario here. I left that way of working years ago and have been very comfortable being a permanent employee for the last several years. Had my tax done with the automated assessments the last two years and before that took me maybe 10 minutes to submit my return online. Such a breeze.
I still have nightmares from my contracting days submitting expenses for everything and the next and never catering for leave days...what a pain... pros and cons I suppose... ponders...

 

[Cius]

I don't think you need to set up a business if you're a sole proprietor. In fact, I think it's better tax-wise to NOT set up a business.

OK. Did not know that. Still, I would have to switch my tax to being done by a tax practitioner/accountant so I would check that advice with them perhaps? The companies I spoke to all indicated you needed a tax entity you could invoice them from and said most of their freelance contractors set up a 1 man PTY ltd type affair.

 

[Spizz]

What if one works remotely for a foreign company and one gets paid in another currency?
How does that effect your tax return?
I'm guessing foreign companies do not issue IRP5s...?

No, but they issue a wage slip every month which will be asked for if you get audited.

OK. Did not know that. Still, I would have to switch my tax to being done by a tax practitioner/accountant so I would check that advice with them perhaps? The companies I spoke to all indicated you needed a tax entity you could invoice them from and said most of their freelance contractors set up a 1 man PTY ltd type affair.

I get my salary paid to Wise in Euros and transfer from there to Rands into my normal FNB account and also some GBP to an account in UK, so my tax practitioner submits my return like a normal submission using the full amount I get paid in Euros whether it comes here or to UK. To do otherwise and perhaps just declaring the Rands part is imo taking a huge risk (and illegal) because apart from anything else the people in the UK will want to know where these deposits are coming from (depending on amounts).

If you want to save on income tax, get a good practitioner.

 

[Peps]

No, but they issue a wage slip every month which will be asked for if you get audited.



I get my salary paid to Wise in Euros and transfer from there to Rands into my normal FNB account and also some GBP to an account in UK, so my tax practitioner submits my return like a normal submission using the full amount I get paid in Euros whether it comes here or to UK. To do otherwise and perhaps just declaring the Rands part is imo taking a huge risk (and illegal) because apart from anything else the people in the UK will want to know where these deposits are coming from (depending on amounts).

If you want to save on income tax, get a good practitioner.

hey @Spizz,
can I ask you what kind of account do you have with Wise? and whether you keep some funds in Wise at all times or always transfer it to ZAR & GBP?

Lastly, did you get a legal opinion that not all your salary should be converted to ZAR first? or you have you gone through a tax return with SARS without problems?

Thanks!

 

[noxibox]

No-one I know had to set up a company to do this. They just used their monthly payslips as documentation if SARS requested proof. No need for anyone to do their taxes for them either. They were just normal provisional taxpayers.

hey @Spizz,
can I ask you what kind of account do you have with Wise? and whether you keep some funds in Wise at all times or always transfer it to ZAR & GBP?

Lastly, did you get a legal opinion that not all your salary should be converted to ZAR first? or you have you gone through a tax return with SARS without problems?

Thanks!

It makes no difference how much you repatriate as long as you declare the full amount you were paid. Only declaring what you repatriate will be illegal.

 

[Spizz]

hey @Spizz,
can I ask you what kind of account do you have with Wise? and whether you keep some funds in Wise at all times or always transfer it to ZAR & GBP?

Lastly, did you get a legal opinion that not all your salary should be converted to ZAR first? or you have you gone through a tax return with SARS without problems?

Thanks!

I declare the full amount I get paid in Euros that is shown on my salary advice slip, and that gets paid directly into my Wise account.

So company pays my salary to Wise and I do two things from there. I convert most to ZAR and send that to my FNB account here, and then I convert the remainder to GBP and sent that to my UK bank account. So basically the money going to the UK has been taxed in South Africa.

I don't keep any money in Wise though, I transfer as soon as I get the notification that my salary is in. Trying to judge which way the exchange rate is going cost me dearly once and the volatility of the Rand isn't worth it.

Money goes in to Wise, my phone pings a notification, I immediately exchange and send.

But as for SARS, I have a tax practitioner who takes care of my returns and all of the dealing with SARS and would highly recommend you use one too. They really do save you money in the long run.

Edit: I noticed recently that Wise have started to charge you for holding money in your account for more than 3 days iirc. Account type for me is just a freebie basic set up.

 

[RedViking]

It's not rocket science.

 

[Spizz]

It's not rocket science.

People make it as such when trying to wangle things.

Dangerous game imo.