Angola – Recent Amendments affecting payroll

Legal Framework for Mandatory Social Security Protection and Social Security Contributions

Presidential Decree No. 227/18, dated September 27th, 2018, approves the new Legal Framework for Mandatory Social Security Protection and Social Security Contributions, repealing the Decree No. 38/08, dated June 19th. Essentially, the following points stand out within this new regime:

  • Scope:
    • Employers and equivalent entities and employees who are covered by Mandatory Social Protection;
    • Other special regimes that comprise the Mandatory Social Protection.
  • The contribution rate remains set at 8% for the employer and 3% for the employee, of the total remuneration of the employee upon which the contributions are levied.
  • Significant broadening of the basis for Social Security contributions, being considered the total gross amount of allowances of the employee, namely all cash benefits which, according to the legal labour relationship, are owed by the Employers to the employees.
  • The following cash benefits are excluded from Social Security contributions taxable basis:
    • Social benefits paid by the employers within the scope of Mandatory Social Protection (e.g. Family allowance);
    • Vacation allowance.
    • The amounts corresponding to the subscription or participation made by employees and employers of complementary social protection arrangements as foreseen in specific legislation.
    • The amounts corresponding to the subscription or participation made by employees and employers of complementary social protection arrangements as foreseen in specific legislation.
    • The amounts corresponding to the subscription or participation made by employees and employers of complementary social protection arrangements as foreseen in specific legislation.
  • The contributions payment, whether owed by the employer or due by the employee, is responsibility of the employer and should be made through the withholding mechanism, directly upon the employee’s allowances.
  • The deadline for payment of the monthly contributions is maintained (until the 10th day of the following month), and the non-compliance of this deadline is subject to the payment of interests at the rate of 1% per month, upon the initial amount due.
  • This Decree enters into force 90 days after the date of its publication, this is, on December 26th, 2018.

South African Tax Residents Working Abroad

With effect from the 1 March 2020, South African working abroad will no longer get the benefit of tax exemption for earnings earned from a foreign source except for the first million rand in terms of revised section 10(1)(o)(ii) to the Income Tax Act No 58 of 1962.

What choices do South African Tax Residents working abroad have? Firstly, they can accept the changes in the law and pay the tax due on this foreign remuneration in South Africa. South African employers paying the foreign remuneration will have to withhold PAYE on the monthly salary but can consider the foreign tax paid on the same remuneration? There is still some debate as to whether the Fourth Schedule of the Income Tax Act No 58, of 1962 automatically allows the employer to take into account the foreign tax paid or whether a hardship directive needs to be applied for on behalf of the employee. Hopefully, SARS will add this directive application on line to speed up the directive application process. The employee should therefore not be out of pocket other than to the extent that the South African tax is more than the foreign tax paid.

Should the employer not be a local South African employer then then South African working abroad will have to register as a provisional taxpayer. Instead of only submitting an annual tax return they will now have to submit provisional tax returns at the end of August and February of each year. The estimate made in February must be accurate to meet the requirement of being within 80% of the final taxable income reflected on the income tax return. Failure to register as a provisional taxpayer or incorrect estimates comes with hefty fines. Once again, any foreign tax paid can be taken into account as a credit against the local taxes payable. On assessment the taxpayer will have to furnish proof of the foreign tax paid, and with different tax years in each country this will not always be an easy process.

The second alternative is for South African residents working abroad is to consider emigrating from South Africa. This decision cannot be taken lightly as any resident returning to South Africa within a 5-year period will be seen as a failed emigration.  Failed emigration have both Reserve Bank and South African Revenue Service implications. South African residents who plan to emigrate will have a Capital Gain Tax implication at the time that they emigrate. The need to disclose gains made on all assets from date of purchase to date of emigration. This has a cashflow implication as the assets would not have been sold yet the tax on the gains would have to be paid to obtain a tax clearance for the purposes of emigration.

The other problem that South African may have is where could they obtain residency in another country to ensure that the emigration is possible.  If South African are unable to get residency due to ancestry rights in another country the next alternative is to buy residency rights which does not come cheap.

We at WTS South Africa (Pty) Ltd can assist South Africans with the emigration process from both a Reserve Bank and South African Revenue Services perspective. Our global firm can advise on countries that offer emigration facilities and assist with the set up in these various countries.

March 2020 may seem like some time from now, but time runs away with us. We therefore suggest that you need to consider your options and start putting things in place for whatever choice you may make.