1. MANAGING AFRICA EXPATRIATE ASSIGNMENTS
Shohana Mohan
Tax Associate
BDO South Africa
Introduction
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2. What we will discuss today
Interesting facts on assignments in Africa
General taxation rules relating to Expatriate Employees
Assignments into Africa – Points for consideration
Africa – Assignment Planning
Checklist / factors for consideration – OUTBOUND / INBOUND
CASE STUDY – Possible Solutions
Questions
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Facing the Challenges of Doing Business in Africa
Expatriate Tax System – Shohana Mohan

3. Interesting Facts – AFRICA / EMEA Region
In a recent ORC Worldwide Survey in which 930 Multinational Organisations participated:
Growth in Expatriate Populations increased from 28,105 in 1998 to 95,141 (2008) in the EMEA region as compared with Japan, Americas and Asia Pacific
Popular Assignee Destinations in the EMEA region:
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Facing the Challenges of Doing Business in Africa
Expatriate Tax System – Shohana Mohan

4. Policy Trends in Africa:
Interesting Facts – AFRICA / EMEA Region (Cont)
Policy Trends in Africa:
43%*
Pay Mobility Premiums
82%*
Pay Hardship Allowances
80%*
Pay Cost of Living Allowances – COLA
87%*
Provide a pre-assignment trip for Expat + Spouse
53%*
Adopt a Localisation Policy (low cost alternative)
71%*
Provide Economy Class Travel and 29% provide Business Class Travel
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These slides are based on the ‘slide master’ but the copy is entered into a custom text box. The ‘slide master’ generates the correctly sized and positioned BDO logo and graphic devices.
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*197 Multinational Organisations participated in the Survey – November 2009
Facing the Challenges of Doing Business in Africa
Expatriate Tax System – Shohana Mohan

5. General Taxation Rules – Expatriate Employees
SOURCE
RESIDENCE
Basis of Taxation
South African tax residents liable for tax on worldwide income and capital gains
Non-South African residents are liable for tax on their South African sourced income and capital gains (subject to certain exclusions)
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Quotation or key information slides are used to emphasise key points in a presentation and should be used sparingly.
These slides are based on the ‘slide master’ but the copy is entered into a custom text box. The ‘slide master’ generates the correctly sized and positioned BDO logo and graphic devices.
The quotation text appears in either BDO Blue, BDO Teal, BDO Burgundy, BDO Copper, BDO Fuchsia or BDO Grey 28pt. Trebuchet MS Regular (enclosed within true speech marks for the text language in use). The source of the quotation appears in BDO Red 18pt. Trebuchet MS Regular on a separate line. Use double quotation marks to denote speech and attributable quotations.
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Facing the Challenges of Doing Business in Africa
Expatriate Tax System – Shohana Mohan

6. ! General Taxation Rules – Expatriate Employees
Who is regarded as tax resident of South Africa
ORDINARILY RESIDENT - not defined in the Income Tax Act.
Case law = place an individual will return to from his/her wanderings
PHYSICAL PRESENCE - annual test
> 91 days in the current year of assessment
> 91 days in the five preceding years of assessment
915 days in aggregate in the five preceding years of assessment
NOT exclusively a resident of another country when the DTA between South Africa and that other country is applied
Definition of ‘Resident’ for
Taxation
Immigration
Exchange Control
ARE ALL DIFFERENT !
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These slides are based on the ‘slide master’ but the copy is entered into a custom text box. The ‘slide master’ generates the correctly sized and positioned BDO logo and graphic devices.
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Facing the Challenges of Doing Business in Africa
Expatriate Tax System – Shohana Mohan

7. Taxation of Employment Income
General Taxation Rules – Expatriate Employees
Taxation of Employment Income
Worldwide income – exemption of employment income relating to services rendered outside South Africa for and on behalf of an employer.
61 consecutive days and an aggregate of 184 days in any 12 month period
Residents
Taxable on workdays in South Africa
Application of Double Tax Treaty
More than 183 days in South Africa
Paid by South African resident company
Costs borne by a permanent establishment in South Africa
Non-Residents
Domestic law prescribes to the extent a South African tax resident renders
services outside South Africa for and on behalf of an Employer for a period or periods exceeding 184 days of which 61 days are continuous during any 12 month period, the remuneration so earned is exempt from South African tax.
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Facing the Challenges of Doing Business in Africa
Expatriate Tax System – Shohana Mohan

8. Nature of duties of assignees
Africa – Structure: Some points to consider
Type of assignment
Nature of duties of assignees
Type of pay elements
Upfront project costing
Secondment
Transfer
Localisation
To avoid potential corporate risks, i.e. permanent establishment exposure
Method of pay
How to deliver benefits to optimise tax saving
Cost saving exercise
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Facing the Challenges of Doing Business in Africa
South Africa Tax System – Shohana Mohan

9. Africa Assignment Planning
Payrolls:
Shadow payroll in SA to mirror host payroll
Host country payroll setup
Initial Planning Phase
Review Contracts
Review Policies & Remuneration Methodologies
Formulate & Design Assignment build-up model
Review International Assignment Policy (country specific)
Employees Tax Withholding (SA/Host)
Understanding core business needs
Review Policies to ensure:
Consistency with country specific tax laws
Align policy to maximise tax saving opportunities
Legal nature of contracts:
Secondment
Transfer
Localisation
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Estimation of Salary Package:
Build-up remuneration model
Home/Host Tax liabilities
Country specific matrix detailing:
Taxation of certain benefits/allowances
Payroll obligations/requirements
Facing the Challenges of Doing Business in Africa
South Africa Tax System – Shohana Mohan

10. 2-5 year Secondment Agreements 2-5 year Secondment Agreement
Case Study – Expatriate into South Africa and out of South Africa
JPS MNE
Recharge salary costs
2-5 year Secondment Agreements
2-5 year Secondment Agreement
JPS SA
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JPS SA
JPS in Mauritius, Botswana, Uganda and Zambia may be required to second their staff to work on assignments in South Africa. South Africa may also second their staff to assist in projects in these countries. The time frame for these projects could be between 2 and 5 years.
Facing the Challenges of Doing Business in Africa
Expatriate Tax – Shohana Mohan

11. Does the employee trigger tax residence status in the host country
Case Study – Checklist / Factors for Consideration (Outbound Expatriates)
Immigration – Work permits/Visas – with which entity must the secondment contract be concluded?
Employees are tax resident in South Africa. Taxable on worldwide income, subject to certain exemptions.
Type of Assignment, i.e. Secondment / Transfer / Localisation. Who is the legal employer and does the substantive employment agreement hold in the case of dismissals etc.
Will the days requirements, i.e. 61 consecutive and 184 aggregate days be met in a 12 month period
Does the employee trigger tax residence status in the host country
PAYROLL MANAGEMENT – will a split payroll be operated and will the employee maintain PENSION/PROVIDENT FUND contributions in SA. SOCIAL SECURITY considerations in host country
What types of pay elements are to be included, i.e. hardship/cost of living allowances – will the tax be paid on behalf of employees
Are there minimum wage requirements? Are there Exchange Controls to be considered both in SA and the host location
Corporate issues – will presence of the employees create a permanent establishment risk in the respective host countries for JPS SA
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These slides are based on the ‘slide master’ but the copy is entered into a custom text box. The ‘slide master’ generates the correctly sized and positioned BDO logo and graphic devices.
The quotation text appears in either BDO Blue, BDO Teal, BDO Burgundy, BDO Copper, BDO Fuchsia or BDO Grey 28pt. Trebuchet MS Regular (enclosed within true speech marks for the text language in use). The source of the quotation appears in BDO Red 18pt. Trebuchet MS Regular on a separate line. Use double quotation marks to denote speech and attributable quotations.
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Facing the Challenges of Doing Business in Africa
South Africa Tax System – Shohana Mohan

12. Case Study – Checklist / Factors for Consideration (Inbound Expatriates)
Immigration – Work permits/Visas
Employees are non resident for tax purposes in South Africa. Taxable on South African sourced income
Type of Assignment, i.e. Secondment / Transfer / Localisation. Who is the legal employer and does the substantive employment agreement hold in the case of dismissals etc.
Is there a DTA in place between South Africa and the country in which the employee is resident
Does domestic law in the respective countries require withholding of tax
Does the DTA apply and is the employee subject to PAYE withholding in South Africa
Is a split payroll required to be operated
Corporate issues – will presence of the employees create a permanent establishment risk in South Africa for JPS MNE
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These slides are based on the ‘slide master’ but the copy is entered into a custom text box. The ‘slide master’ generates the correctly sized and positioned BDO logo and graphic devices.
The quotation text appears in either BDO Blue, BDO Teal, BDO Burgundy, BDO Copper, BDO Fuchsia or BDO Grey 28pt. Trebuchet MS Regular (enclosed within true speech marks for the text language in use). The source of the quotation appears in BDO Red 18pt. Trebuchet MS Regular on a separate line. Use double quotation marks to denote speech and attributable quotations.
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Facing the Challenges of Doing Business in Africa
South Africa Tax System – Shohana Mohan

13. Case Study – Solution…
Double Taxation Agreements (DTA’s) exist with South Africa and
Mauritius
Botswana
Zambia
Uganda !
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These slides are based on the ‘slide master’ but the copy is entered into a custom text box. The ‘slide master’ generates the correctly sized and positioned BDO logo and graphic devices.
The quotation text appears in either BDO Blue, BDO Teal, BDO Burgundy, BDO Copper, BDO Fuchsia or BDO Grey 28pt. Trebuchet MS Regular (enclosed within true speech marks for the text language in use). The source of the quotation appears in BDO Red 18pt. Trebuchet MS Regular on a separate line. Use double quotation marks to denote speech and attributable quotations.
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Facing the Challenges of Doing Business in Africa
South Africa Tax System – Shohana Mohan

14. Mauritius/Botswana/Uganda/Zambia
Case Study – Solution – Expatriates out of South Africa
South Africa
Mauritius/Botswana/Uganda/Zambia A
Immigration
Work permit applications should be processed before business case dictates urgency… B
Contractual arrangements
Secondment agreement from JPS SA to the relevant host country entity. A host country assignment letter should also be concluded with the employee to align certain host country conditions of employment, i.e. work hours D
Tax / Payroll related considerations
Employer should take global responsibility for the taxes to ensure optimal Compliance.
Categorise assignment – into:
Business traveller (1 – 3 months)
Short-term ( months)
Medium term (12 – 36 months)
Long-term ( months)
Quotation or key information slides (white background)
Quotation or key information slides are used to emphasise key points in a presentation and should be used sparingly.
These slides are based on the ‘slide master’ but the copy is entered into a custom text box. The ‘slide master’ generates the correctly sized and positioned BDO logo and graphic devices.
The quotation text appears in either BDO Blue, BDO Teal, BDO Burgundy, BDO Copper, BDO Fuchsia or BDO Grey 28pt. Trebuchet MS Regular (enclosed within true speech marks for the text language in use). The source of the quotation appears in BDO Red 18pt. Trebuchet MS Regular on a separate line. Use double quotation marks to denote speech and attributable quotations.
Note: This slide does not exist as a ‘slide master’. Therefore it is recommended that you copy and paste this slide into your presentation.
Facing the Challenges of Doing Business in Africa
South Africa Tax System – Shohana Mohan

15. Case Study – Solution – Expatriates out of South Africa…
TAX IMPACT
South Africa
Mauritius
Botswana
Uganda
Zambia
Best practices
Business Traveler
(1 -3 months)
Unlikely to meet days’ requirements as prescribed in terms of domestic law, i.e. 61 continuous days and an aggregate of 184 days in any 12 month period. Normal PAYE withholding in SA.
Application of the SA/Mauritius DTA:
<183 days in Mauritius and salary costs are not recharged to JPS Mauritius, payroll tax withholding may be levied in South Africa only.
Application of the SA/Botswana DTA:
<183 days in Botswana and salary costs are not recharged to JPS Botswana, payroll tax withholding may be levied in South Africa only.
NB: Certain Permanent Establishment Risk Exposures based on contractual arrangements must be considered
Application of the SA/Uganda DTA:
<183 days in Uganda and salary costs are not recharged to JPS Uganda, payroll tax withholding may only be levied in South Africa.
DTA exists between SA and Zambia
Zambia levies tax at source.
<183 days in Tanzania and salary costs are not recharged to JPS Tanzania payroll tax withholding may only be levied in South Africa.
Employee should remain on SA payroll
Normal PAYE withholding in SA should apply
Days should be tracked and monitored to ensure optimal compliance
Daily per diems / allowances should be provided to defray incidental costs in host location.
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These slides are based on the ‘slide master’ but the copy is entered into a custom text box. The ‘slide master’ generates the correctly sized and positioned BDO logo and graphic devices.
The quotation text appears in either BDO Blue, BDO Teal, BDO Burgundy, BDO Copper, BDO Fuchsia or BDO Grey 28pt. Trebuchet MS Regular (enclosed within true speech marks for the text language in use). The source of the quotation appears in BDO Red 18pt. Trebuchet MS Regular on a separate line. Use double quotation marks to denote speech and attributable quotations.
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Facing the Challenges of Doing Business in Africa
South Africa Tax System – Shohana Mohan

16. Case Study – Solution – Expatriates out of South Africa…
TAX IMPACT
South Africa
Mauritius
Botswana
Uganda
Zambia
Best practices
Short-term / Medium term and Long-term assignments
Possible that the days’ requirement for exemption from South African tax may apply.
Monthly payroll withholding tax and statutory levies (including social security contributions) may become applicable.
Residency rules: An individual is considered tax resident in Zambia if he/she spends more than 183 days in any tax year (1 April to 31 March ).
Mandatory National Pension Scheme Authority (NAPSA) Contributions (5% Employer + 5% Employee) are applicable in Zambia
Choosing to tax equalise employees to encourage mobility considering the highest Marginal Tax rates in the respective countries:
Mauritius: per cent
Botswana: per cent
Uganda: per cent
Zambia: per cent
Employees may be remunerated via split payrolls
Certain countries, e.g. Mauritius do not allow split pay operations –in this case 100% of the salary should be delivered in SA and the tax and related levies should be transferred to Mauritius for payment to the relevant Authorities
PAYE withholding may be terminated in SA if days’ tests are confirmed
Quotation or key information slides (white background)
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These slides are based on the ‘slide master’ but the copy is entered into a custom text box. The ‘slide master’ generates the correctly sized and positioned BDO logo and graphic devices.
The quotation text appears in either BDO Blue, BDO Teal, BDO Burgundy, BDO Copper, BDO Fuchsia or BDO Grey 28pt. Trebuchet MS Regular (enclosed within true speech marks for the text language in use). The source of the quotation appears in BDO Red 18pt. Trebuchet MS Regular on a separate line. Use double quotation marks to denote speech and attributable quotations.
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Facing the Challenges of Doing Business in Africa
South Africa Tax System – Shohana Mohan

17. Case Study – Solution – Expatriates out of South Africa…
The payroll may be processed and managed in South Africa
Certain countries allow for a split payroll method of remuneration
Some countries do not allow operation of a split payroll, i.e. MAURITIUS requires either 100% salary is paid in SA or 100% paid in MAURITIUS
In these countries payroll may be managed in SA and the taxes and statutory levies should be transferred to MAURITIUS
The South African payroll data input (shadow payroll) should mirror the host country payroll input
The shadow payroll is designed to capture the relevant pay items and ensure correct allocation is made of any hypothetical tax deductions
Reserve Bank approval may be necessary to remit funds to the respective countries for the purpose of settling the payroll tax and related levies
Quotation or key information slides (white background)
Quotation or key information slides are used to emphasise key points in a presentation and should be used sparingly.
These slides are based on the ‘slide master’ but the copy is entered into a custom text box. The ‘slide master’ generates the correctly sized and positioned BDO logo and graphic devices.
The quotation text appears in either BDO Blue, BDO Teal, BDO Burgundy, BDO Copper, BDO Fuchsia or BDO Grey 28pt. Trebuchet MS Regular (enclosed within true speech marks for the text language in use). The source of the quotation appears in BDO Red 18pt. Trebuchet MS Regular on a separate line. Use double quotation marks to denote speech and attributable quotations.
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Facing the Challenges of Doing Business in Africa
South Africa Tax System – Shohana Mohan

18. Mauritius / Botswana/ Zambia / Uganda
Case Study – Solution – Expatriates into South Africa
Mauritius / Botswana/ Zambia / Uganda
South Africa A
Immigration
Work permit applications must be done well in advance – intra company work transfer permit may be applicable as it is least administrative and is valid for up to 24 months. However, may need to investigate whether employees have prior work history within the group. B
Contractual arrangements
Secondment agreements – legal employer remains outside South Africa. Dismissals etc. to be handled by home country. D
Tax / Payroll related considerations
Employer should take global responsibility for the taxes to ensure optimal Compliance.
Categorise assignment – into:
Business traveller (1 – 3 months)
Short-term ( months)
Medium term (12 – 36 months)
Long-term ( months)
Quotation or key information slides (white background)
Quotation or key information slides are used to emphasise key points in a presentation and should be used sparingly.
These slides are based on the ‘slide master’ but the copy is entered into a custom text box. The ‘slide master’ generates the correctly sized and positioned BDO logo and graphic devices.
The quotation text appears in either BDO Blue, BDO Teal, BDO Burgundy, BDO Copper, BDO Fuchsia or BDO Grey 28pt. Trebuchet MS Regular (enclosed within true speech marks for the text language in use). The source of the quotation appears in BDO Red 18pt. Trebuchet MS Regular on a separate line. Use double quotation marks to denote speech and attributable quotations.
Note: This slide does not exist as a ‘slide master’. Therefore it is recommended that you copy and paste this slide into your presentation.
Facing the Challenges of Doing Business in Africa
South Africa Tax System – Shohana Mohan

19. Case Study – Solution – Expatriates into South Africa…
TAX IMPACT
South Africa
Mauritius
Botswana
Uganda
Zambia
Best practices
Business Traveler
(1 -3 months)
In terms of the DTA between South Africa and the host country, employee may be taxable if benefits and allowances are provided locally in SA or if salary costs are being recharged to JPS SA.
May remain taxable in the country in which the employee is regarded as a tax resident.
Employee should remain on the home country payroll
Benefits and allowances and salary costs should be borne by in the home country
Recharge of salary costs should be charged on a cost plus basis (salary only should not be recharged).
Quotation or key information slides (white background)
Quotation or key information slides are used to emphasise key points in a presentation and should be used sparingly.
These slides are based on the ‘slide master’ but the copy is entered into a custom text box. The ‘slide master’ generates the correctly sized and positioned BDO logo and graphic devices.
The quotation text appears in either BDO Blue, BDO Teal, BDO Burgundy, BDO Copper, BDO Fuchsia or BDO Grey 28pt. Trebuchet MS Regular (enclosed within true speech marks for the text language in use). The source of the quotation appears in BDO Red 18pt. Trebuchet MS Regular on a separate line. Use double quotation marks to denote speech and attributable quotations.
Note: This slide does not exist as a ‘slide master’. Therefore it is recommended that you copy and paste this slide into your presentation.
Facing the Challenges of Doing Business in Africa
South Africa Tax System – Shohana Mohan

20. Case Study – Solution – Expatriates into South Africa…
TAX IMPACT
South Africa
Mauritius
Botswana
Uganda
Zambia
Best practices
Short-term / Medium term and Long-term assignments
Most likely to be present for more than 183 days in South Africa – therefore taxing rights may be conferred in South Africa
Foreign Tax Credits may be claimable in the respective home locations in terms of the application of the DTA between the respective home country and South Africa.
Timing differences based on different tax years may result in cash flow disadvantages for the employing entity (in tax equalised scenarios)
Tax return preparation and tracking should be monitored by the employing company to ensure refund of taxes are communicated and returned within the prescribed periods.
NB: Employee should not be disadvantaged
Employee may remain on home country payroll
A shadow payroll must also be operated in SA to account for the salary/exchange rate conversions and to ensure PAYE is paid on or before 7th of each month
JPS SA assumes the role of representative employer in this regard
Review benefits and allowances to optimise tax saving opportunities
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Quotation or key information slides are used to emphasise key points in a presentation and should be used sparingly.
These slides are based on the ‘slide master’ but the copy is entered into a custom text box. The ‘slide master’ generates the correctly sized and positioned BDO logo and graphic devices.
The quotation text appears in either BDO Blue, BDO Teal, BDO Burgundy, BDO Copper, BDO Fuchsia or BDO Grey 28pt. Trebuchet MS Regular (enclosed within true speech marks for the text language in use). The source of the quotation appears in BDO Red 18pt. Trebuchet MS Regular on a separate line. Use double quotation marks to denote speech and attributable quotations.
Note: This slide does not exist as a ‘slide master’. Therefore it is recommended that you copy and paste this slide into your presentation.
Facing the Challenges of Doing Business in Africa
South Africa Tax System – Shohana Mohan

21. CONTRACTUAL ARRANGEMENTS TAX OPTIMISATION / PAY ELEMENTS DEFINED
Case Study Solution – SUMMARY
CONTRACTUAL ARRANGEMENTS
IMMIGRATION
TAX OPTIMISATION / PAY ELEMENTS DEFINED
PAYROLL MANAGEMENT
Closing the gap in communication – FINANCE / HUMAN RESOURCE / PAYROLL !
Quotation or key information slides (white background)
Quotation or key information slides are used to emphasise key points in a presentation and should be used sparingly.
These slides are based on the ‘slide master’ but the copy is entered into a custom text box. The ‘slide master’ generates the correctly sized and positioned BDO logo and graphic devices.
The quotation text appears in either BDO Blue, BDO Teal, BDO Burgundy, BDO Copper, BDO Fuchsia or BDO Grey 28pt. Trebuchet MS Regular (enclosed within true speech marks for the text language in use). The source of the quotation appears in BDO Red 18pt. Trebuchet MS Regular on a separate line. Use double quotation marks to denote speech and attributable quotations.
Note: This slide does not exist as a ‘slide master’. Therefore it is recommended that you copy and paste this slide into your presentation.
Facing the Challenges of Doing Business in Africa
South Africa Tax System – Shohana Mohan

22. CONCLUSION
THANK YOU!
Quotation or key information slides (white background)
Quotation or key information slides are used to emphasise key points in a presentation and should be used sparingly.
These slides are based on the ‘slide master’ but the copy is entered into a custom text box. The ‘slide master’ generates the correctly sized and positioned BDO logo and graphic devices.
The quotation text appears in either BDO Blue, BDO Teal, BDO Burgundy, BDO Copper, BDO Fuchsia or BDO Grey 28pt. Trebuchet MS Regular (enclosed within true speech marks for the text language in use). The source of the quotation appears in BDO Red 18pt. Trebuchet MS Regular on a separate line. Use double quotation marks to denote speech and attributable quotations.
Note: This slide does not exist as a ‘slide master’. Therefore it is recommended that you copy and paste this slide into your presentation.
Facing the Challenges of Doing Business in Africa
South Africa Tax System – Shohana Mohan