By Amanda Visser

Slight changes were introduced to the second amendment of the Immigration Regulations that allows for a new three-year digital nomad visa. Although the visa has been lauded as a substantial boost for the South African economy, tax and employment specialists still have reservations about risks for foreign employers.

In essence the digital nomad visa will allow remote workers to conduct work for a foreign employer in South Africa, or for remote workers who derive foreign source income on a remote basis. These changes became effective last week (20 May).

The foreigner must earn a gross income of at least R1 million per annum. If the visa is issued for a period not longer than six months in a 36-month period the remote worker must apply for exemption from the South African Revenue Service (SARS) to register for tax in South Africa.

However, if the visa is issued for a period longer than six months in the 36-month period the remote worker must register with SARS.

The changes

Bowmans employment benefits and tax specialists, Chloë Loubser, Sian Gaffney and Aneria Bouwer, highlight some of the changes to the provisions in the “second take” of the second amendments in a recent article.

Previously the digital nomad visa was available only for work conducted in South Africa for a foreign employer on a remote basis. However, the amended regulations now refer “somewhat clumsily” to work conducted for a foreign employer or for workers who derive foreign source income on a remote basis.

Loubser says the inclusion of the word “or” may be intended to extend the application of the digital nomad visa to foreign entrepreneurs or individual consultants who work for themselves, remotely.

“They would not work for a foreign employer but would presumably receive payment from foreign clients. The use of the term foreign source income is bound to cause confusion,” she warns.

Another change is the 36-month period. Previously the foreign employee was exempted if the visa was issued for a period of less than six months in a 12-month period.

The 36-month period aligns with the maximum duration of the visa. This exemption will not be automatic, and the employee must apply for the exemption to register as a taxpayer with SARS.

Loubser says an added provision to the second amendment relates to compliance with legislation governing employment of workers in South Africa – if applicable. “It is not entirely clear from the wording whether it is the foreign employee, or the foreign employer who is required to comply with this legislation and which employment legislation is contemplated here.”

She says the intention may be to ensure that the terms and conditions of employment for foreign employees are in line with that of the Basic Conditions of Employment Act while they are working in South Africa.

The risks

As things stand foreign employers still face the risk of a remote worker creating a permanent establishment for the foreign employer. This could trigger an obligation to register as a taxpayer and as an employer with SARS.

“Without the removal of these tax risks, the digital nomad visa will not bring the economic boost our country so desperately needs,” the Bowman experts warn.

From an employment perspective it is important for foreign employers who may allow their employees to work remotely from South Africa to be wary of possible employment law implications.

The activities

The activities that are included in the second amendment include:

• teaching at an international school;
• work done in respect of film and advertisement production;
• foreign journalists seconded to South Africa;
• visiting professors, lecturers or researchers;
• artists wanting to paint, write or sculpt;
• entertainers;
• tour leaders; and
• religious leaders of recognised organisations or denominations.

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