South Africa Introduces Digital Nomad Visa

The South Africa’s Digital Nomad Visa (DNV) refers to a remote work long-term visitor visa.¹ The visa became reality with the publication in the gazette on October 9, 2024 of the Third Amendment of the Immigration Regulations which amended §11(1)(b)(iv) of the Immigration Act of South Africa.² The DNV allows foreign nationals to live and work (remotely) in the South Africa for up to 36 consecutive months.³ The spouse and family are allowed to accompany the DNV but do not have work or study

authorizations. This visa is distinctly different than a §11(2) Short Term Work Visa though there is some overlap between the two visas which may be beneficial for employers to consider.⁴

• File application and pay R425 fee;

• Valid Passport (with two blank visa pages and an expiration date at least 30 days longer than your planned date of departure);

• Departing flight evidence (ticker or reservation);⁶

• Evidence of remote work in the form of a “valid contract of employment signed by both the applicant and the foreign based employer;”⁷

• Proof of prior earnings (wages or other earnings) of a minimum annual remuneration of no less than the equivalent of R650,796.00 ($37,000 USD)⁸;

Practice Tips – The application form doesn’t require it but as a result of other practical experience with

§11(1)(B)(iv) class visas an applicant should be prepared to show that he/she has/have (1) travel medical insurance with treatment coverage in-country or evacuation provisions; (2) a criminal record background check for all countries lived in for 90 consecutive days or more in the past 10 years including South Africa (if ever visited at all); and (3) bank statements for at least the prior three (3) months reflecting the income required by the criterion or more bank statements which reflect when averaged the required income threshold (“assets” are not sufficient to demonstrate compliance with the threshold since this is an “earnings” tested criterion);⁹

The DNV differs from traditional tourist visas in that it offers long-term (36 months) work authorized residency without requiring a local employment contract. The DNV initially allows for a one-year stay, offering this quality of visa and the offer should make South Africa even more attractive for the remote working generation.

Death & Taxes – Taxes are addressed in part by the legislation. Generally, the Digital Nomad who stays in South Africa for more than 183 days (six months) within a 12 month period, must register with the South African Revenue Service (SARS) and pay income taxes on income “earned” in South Africa. For stays under 183 days, the Digital Nomad must still register with SARS (unless your country of origin is Double Taxation Agreement “DTA” or treaty exempt)¹⁰ but is eligible for a tax exemption.¹¹ In either event the DNV has an obligation to register with SARS and to file an annual earned income tax return regardless of the length of stay.

The nasty bit for the unsuspecting Digital Nomad is the “global earnings tax” which South Africa can levy if the Digital Nomad is not alert to the “time in-country” requirements for tax assessment purposes. The taxes applied to the Digital Nomad were not addressed by the legislation at a more detailed level (at least not yet) which would address this nasty bit so the general rules of taxation will apply and SARS is its own master when it comes to taxes.

Generally, the global earnings of the Digital Nomad are subject to tax in South Africa¹² if the Digital Nomad satisfies one of these two main tests to determine “tax residency” ¹³ for people resident in South Africa – (1) the Ordinarily Resident test¹⁴ and (2) the Physical Presence test.¹⁵ If the Digital Nomad is deemed a “tax resident” in South Africa, then tax must be paid on worldwide income regardless of source, even if the Digital Nomad claims permanent residence abroad or all earned income is derived from work performed remotely.

country with a Double Taxation Agreement or treaty with South Africa (such as the USA), and extends only to the extent that South Africa credits taxes paid elsewhere against taxes owed in South Africa. The Digital Nomad will still get tagged for the highest marginal taxes¹⁶ which, for the US taxpayer, will likely be South African.

Risk Management for Foreign Companies – The legislation is silent on more granular tax questions which foreign companies “engaging” the Digital Nomad will find uncomfortable. The foreign “employer” of the Digital Nomad will have several unanswered taxation questions and employment questions such as whether engaging the Digital Nomad makes the foreign company an “employer” or builds a “substantial presence” (or has a “Permanent Establishment”) in South Africa for legal jurisdictions.¹⁷

It is less likely that South Africa will treat a Digital Nomad as creating a “Permanent Establishment” for the foreign company that engages the Digital Nomad.¹⁸ Treaties may use different variations on decades old language for defining the term however none of the existing language supports interpreting a Digital Nomad (as envisioned) as creating such as presence. The silence of the legislation simply creates a risk that may influence the informed foreign company when it considers engaging a Digital Nomad working from South Africa. The risk includes that the foreign company gets tagged as an “employer” in South Africa which would trigger both an obligation to register as an employer and potentially also a corporate tax liability. The newly minted “employer” would also have to pay “skills development” levies and the “employee.”¹⁹

Better Than All The Rest – Desperately needed and new legislation will yield unexpected results in any environment but in South Africa the ability to hold a dialog with the implementation authorities usually results in a better outcome than expected by foreign company executives. Everyone in South Africa wants the Digital Nomad to succeed from the highest level of government on down to the Border Management Authority (BMA). This visa is a national priority.²⁰ Additionally, there is really no competition in the sub- Saharan SADC countries.²¹ The neighboring countries offer nothing comparable to the South African DNV.²² No such DNV exists in Zimbabwe, Botswana, and Mozambique. Namibia offers only a six month non-renewable visa.²³ The Southern African Development Community (SADC) is a regional economic community made up of 16 countries in Southern Africa and none of these countries is offering the quality and terms of the South African DNV.

References
¹ South Africa’s Department of Home Affairs has announced a significant reform in the country’s immigration policy. The Trusted Employer scheme adopts a new points-based system for foreign worker visas. For general work visas outside the Trusted Employer Scheme, a minimum gross annual income threshold of R650,796 has been established to protect local jobs while attracting high-end skills. This threshold includes Digital Nomad Visas.

² §11(1)(b)(iv) of the Immigration Act of South Africa allows a foreigner to apply for a visitor’s visa for a period of up to three years for prescribed activities. The prescribed activities include:

• Working for a foreign employer in South Africa for a contract that requires certain activities to be carried out in the country
• Teaching at an international school
• Working in the entertainment industry in South Africa, such as an actor, cameraman, or make-up artist
• Working as a foreign journalist seconded to South Africa by a foreign news agency
• Working as a visiting professor, lecturer, or academic researcher
• Working as an artist who wishes to write, paint, or sculpt
• Working as a tour leader or host

To apply for a visitor’s visa under Section 11(1)(B)(iv), the applicant must provide the following documents:

• A completed and signed application form
• A statement or documentation explaining the purpose and duration of the visit
• A valid return air flight ticket or proof of reservation
• Proof of sufficient financial means, such as three months of bank statements
• A valid passport that expires at least 30 days after the intended departure date

³ An initial visa for 12 months renewable for an additional 24 months if criteria are satisfied.

⁴ The Digital Nomad Visa (aka “Remote Work Visa”) is a visa under §11(1) and differs from the short term work visas under §11(2). These are two distinctly different purpose built visa classes. The Digital Nomad Visa is designed for individuals who wish to live in South Africa while working remotely for foreign employers. This visa promotes a flexible lifestyle and supports the local economy by attracting high-earning individuals. In contrast, the Short Term

Work Visa under §11(2) is intended for short-term work assignments. It allows foreign nationals to engage in specific work-related activities in South Africa for a limited period. This visa is suitable for individuals who need to visit the country temporarily to fulfil specific duties on behalf of a foreign employer at a local host company. The §11(2) authorization is a once-off non-renewable visa application (i.e., cannot be extended while in South Africa) to address an immediate short term or urgent need for a limited duration of employer work needed.

⁵ The criteria in excess of the express criteria on the visa application form are “imputed” criteria. The DNV arises under §11(1)(B)(iv) and thus the history and practice of the Department of Home Affairs in reviewing visa applications under §11(1)(B)(iv) suggests (rather than demands) certain evidence in support of the application will aid in its approval. ⁶ It is reasonable to be concerned if the intent is to stay in South Africa longer than 365 days that a return air ticket or reservation is proof the applicant will not have available. However,

applying common sense the successful applicant will make the reservation to depart regardless of the actual intent to depart simply to “tick the box” on this particular criterion.

⁷ This “contract” requirement is a curveball in the legislation. Freelancers, influencers, and Internet personalities are simply not considered in this particular criterion. A work-around is to establish a foreign owned company with which to contract if the applicant is a freelancer etc. That “contract” should be sufficient to “tick the box” on this criterion until the government issues an update influenced by experience with the visa.

⁸ The application demands evidence of R650,796 in previous foreign earnings but several online articles refer to R650,976 as the sum – a difference of approximately $500. It is not clear where the articles came upon the alternative amount compared to the application form stated amount.

⁹ https://www.dha.gov.za/images/notices/8october24/Remote_Work_Visa_-_requirements_-

_9_Oct_2024.pdf ; https://www.dha.gov.za/index.php/notices/1824-remote-work-visa- requirements-9-oct-2024

¹⁰ The Third Amendment now provides that foreign remote workers who are tax resident in a country that has concluded a Double Taxation Agreement (DTA) with South Africa will be required to register with SARS if they are present in the Republic for longer than an aggregate period of 183 days during any 12-month period (which aligns with the terms of most DTAs). Digital nomads from countries that do not have DTAs with South Africa will be required to register with SARS regardless of how long they remain in South Africa.

¹¹ Initially, the amendments provided for foreign remote workers to be exempt from registering with SARS if their visas were issued for a period of less than six months in a 12-month period. This period was then tightened to less than six months in a 36-month period; and rather than an automatic exemption, the regulations entitled the employee to apply to be exempted by SARS from registering as a taxpayer.

¹² The United States taxes the global income of all citizens and Legal Permanent Residents (LPR) regardless of sources and origins. There is a Foreign Earned Income Tax exemption which replaces other deductions on the Form 1040 and it has its own requirements. https://www.irs.gov/individuals/international-taxpayers/figuring-the-foreign-earned-income- exclusion

¹³ Criteria for Individuals to be considered a tax resident. Under South African law a resident is defined by the Income Tax Act, 1962, as either an individual who meets the physical presence test or an individual who is ordinarily resident in South Africa under South African common law.

¹⁴ “Ordinarily Resident” means that South Africa is the country to which that person will naturally and as a matter of course return to after his or her wanderings.

¹⁵ To meet the requirements of the physical presence test that person must be physically present in South Africa for a period or periods exceeding:

• 91 days in total during the year of assessment under consideration, and
• 91 days in total during each of the five years of assessment preceding the year of assessment; and
• 915 days in total during those five preceding years of assessment.

¹⁶ South Africa will not tax foreign earned retirement income of a tax resident. Section 10(1)(gC)(ii). However, social security or pension contributions made in the US will be taxed for US citizens in the US and in South Africa. The United States has entered into agreements, called “totalization agreements,” with several nations for the purpose of avoiding double taxation of income with respect to social security taxes. These agreements must be considered when determining whether an individual is subject to U.S. Social Security/Medicare tax, or whether a U.S. citizen or resident is subject to the social security taxes of a foreign country. A list of countries with whom the United States currently has totalization agreements and copies of those agreements may be obtained at U.S. International Social Security Agreements. South Africa is not one of these countries.

¹⁷ A foreign company is required to register (within 20 days) as an “external company” with CIPC if it conducts or intends to conduct business in South Africa. Section 23 of the Companies Act, 2008, lists a series of activities which will be regarded as conducting business. One of the criteria for registration is “entering into contracts of employment.” Unfortunately, this is the “same” criterion for granting a Digital Nomad Visa (whether or not intentional on the part of the legislation).

¹⁸ Note that the definition of a PE is typically similar under both the Organization for Economic Cooperation and Development (OECD) model treaty standard language and US model treaty standard language.

• Whether the corporation has a fixed place of business within the target country, as defined under the language of a specific treaty
• Whether the corporation operates in the target country through a dependent agent that habitually exercises the authority to conclude contracts on behalf of the corporation in the target country.

South Africa has its own additions to the PE definition which include an evaluation of the “management or control” of the company originating in South Africa; the providing of “services” inside South Africa for ‘an extended period of time” using employees or contractors; and other uniquely South African fact driven assessments of PE status.

¹⁹ Effective 22 December 2023, new South African tax legislation requires non-resident employers with a permanent establishment (PE) in the country to register as employers for employees’ tax (PAYE) purposes and to withhold PAYE from remuneration paid to their employees. This change could have a significant impact on employers with employees that opt to work in South Africa remotely, a situation that has become common recently. These foreign employers are also required to contribute to the Skills Development Levies (SDL) and the Unemployment Insurance Fund (UIF) through the South African Revenue Service (SARS), regardless of whether the foreign employer has a subsidiary or offices in South Africa.

²⁰ IT Web reports as follows: “In a statement issued yesterday (October 9, 2024) , the DHA says the move is in line with the Government of National Unity’s (GNU’s) collective mandate to “overhaul the visa regime to attract skills and investment, and grow the tourism sector”, as outlined by president Cyril Ramaphosa. Says home affairs minister Leon Schreiber: “The gazetting of all required elements for the remote work visitor visa and the new points-based system for work visas amounts to the single most progressive and pro-jobs regulatory reform South Africa has seen in decades.”

https://www.itweb.co.za/article/visa-regime-overhaul-begins-as-digital-nomad-visa- gazetted/rxP3jMBEdY17A2ye

²¹ Angola, Botswana, Comoros, Democratic Republic of the Congo, Eswatini (formerly Swaziland), Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, United Republic of Tanzania, Zambia, and Zimbabwe.

²² https://www.freedomiseverything.com/digital-nomad-visa/

²³ The Namibia Digital Nomad Visa grants a six-month stay. There is a laundry list of documentation required to be filed with the visa application. https://nipdb.com/nomadvisa/ The highlights are as follows:

• The Namibia Digital Nomad Visa is non-renewable;
• Returning applicants can only reapply 12 months after the date of expiry.
• No change of visa status or condition is allowed on a Namibia Digital Nomad Visa;
• Applicants interested in the Namibia Digital Nomad Visa will have to prove that they earn enough money to be self-sufficient.
• Applicants need to demonstrate proof of income/funds (Payslip/Employment Contract) to sustain themselves and dependents (USD2000 – Applicant, USD1000 – Accompanying Spouse, USD500 – per accompanying child per month).
• Applicants must have valid travel documents (passport), health or travel insurance covering risks while in Namibia.
• Approximately USD124 (NAD2200) will be required upon arrival as payment for the Visa.