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SARS, Employers and Remote Workers

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The South African National Treasury’s budget proposals for February 2023 have highlighted intentions to harmonize obligations for both local and foreign employers, particularly affecting remote workers. This move by the Treasury, in coordination with the South African Revenue Service (SARS), could lead to foreign employers being mandated to register as “employers” with SARS. This change is motivated by the growing global trend of remote work, which has been accelerated by the COVID-19 pandemic. It allows employers from different parts of the world to engage South African workers for remote positions, providing mutual benefits.

Currently, there exist disparities in legislation concerning the obligations of foreign employers. The proposed amendments aim to standardize the registration requirements for foreign employers, ensuring parity between resident and foreign employers. Foreign employers who previously didn’t have a “representative employer” in South Africa to handle remuneration and deductions might be required to comply with PAYE deductions, the 1% skills development levy (SDL), and Unemployment Insurance Fund (UIF) contributions.

Practical implications arise from these changes. Foreign employers may lack certain credentials necessary for SARS registration, such as a CIPC registration number or a South African bank account. In response, experts suggest employing an Employer of Record (EOR) company that acts as the in-country employer, managing payroll compliance obligations on behalf of the foreign entity. This arrangement ensures adherence to local employment laws and tax regulations while allowing the foreign employer to maintain control over day-to-day supervision and work-related decisions.

The proposed alignment aims to streamline the regulatory landscape for remote workers and foreign employers in South Africa. The draft Taxation Laws Amendment Bill for 2023, expected in July, will likely provide more specific wording for these amendments. This effort to establish consistent rules for both resident and foreign employers reflects the changing dynamics of the global workforce, driven by the surge in remote work opportunities.

The proposed changes to South African employment regulations seek to address the growing prevalence of remote work by establishing uniform obligations for foreign and local employers. While these changes pose practical challenges, the adoption of an EOR arrangement could serve as a viable solution for foreign employers seeking to navigate the new compliance landscape efficiently. The envisioned amendments represent a broader global trend in adapting legislation to the realities of remote work in the digital age.

Source: BusinessTech South Africa