Where you have international economic interests, your income may potentially be subject to tax both in South Africa as well as in the foreign country, resulting in double taxation. A common misconception we see among South African expats is that they believe they are “automatically tax-exempt” just because there is a DTA in place between the two countries.
This is completely wrong and there are various factors that need to be considered, and objectively proven, and you are still required by law to file a tax return and “claim” exemption under treaty relief. Depending on where a taxpayer falls as a tax resident, taking into account the DTA, will determine where (and how) the taxpayer must pay certain types of taxes on income received.
To correctly apply for treaty relief on your foreign-earned income, you will need to consider which country will actually have the right to tax your income. This is achieved through a measured approach, known as the tie-breaker test and paired with careful evaluation of the DTA provisions concerned, taking into consideration various factors.
