Cheap way for South Africans to travel the world

Working abroad offers South Africans an affordable way to travel the world by earning in foreign currencies while exploring new countries, but there are several financial and tax implications to consider before going overseas.

According to Nedbank, working abroad while travelling offers South Africans, particularly young South Africans, the opportunity to see the world in a much more affordable way.

“You can explore different countries, experience diverse cultures and cuisines and enjoy unique experiences, while earning enough to pay your way around the world – or at least, the bits of it you want to see,” the bank said.

“Working abroad appeals to different types of young travellers. You may want to earn and save in a stronger currency until you have enough to start a business of your own – or to travel further.”

Alternatively, travel can help young people decide what they want to do after school, explore their ancestral roots, experience a new culture, or weigh their emigration options.

However, there are some crucial considerations travellers need to consider before they can start working and exploring abroad.

First, Nedbank advised that prospective travellers should check the necessary paperwork they are required to have to work abroad.

To leave the borders of South Africa, travellers will need to produce a valid passport, as well as all the necessary legal documents required by their destination.

The type of visa and work permit required to enter and work in other countries varies according to their laws, so thorough research of all the necessary paperwork is required.

“Not being able to leave South Africa is one thing, but being stuck in a foreign country without the proper documentation can be a disaster,” Nedbank said.

“Use official foreign government websites to confirm that your research is accurate. You can also contact the foreign representative in South Africa of the host country to check that you have everything in order.”

Asking friends or other South Africans already working abroad about the procedures they had to go through can also offer practical tips that aren’t part of official paperwork.

Travellers should also take note of the warning by South Africa’s Department of International Relations and Cooperation (DIRCO).

“If you do not correctly comply with visa or permit requirements or overstay on your visa or permit, you will be subject to any or all of the following: criminal prosecution, imprisonment, deportation and/or being blacklisted,” DIRCO has warned.

Crucially, Nedbank added that DIRCO does not assist South Africans in obtaining work visas to other countries.

Tax rules and foreign currencies

Nedbank also stressed that travellers should understand the tax rules for their destination country as well as in South Africa.

“When working abroad, you’ll have to comply with the taxation legislation of both your host country and South Africa. This means that you could end up paying income tax in both countries,” the bank said.

The South African Revenue Service (SARS) requires that for those earning an “employment income” in excess of R1.25 million, both countries have a right to tax the income, unless there is a double taxation agreement.

This means that the portion of income earned by the traveller exceeding R1.25 million may end up being “double-taxed”.

“Generally, under the provisions of the relevant double tax agreement, if an employee renders services in a foreign country exceeding 183 days, both countries enjoy the right to tax the income,” SARS said.

The source country enjoys the first right to tax the employment income, while the residence country – in this case, South Africa – provides double tax relief in the form of a foreign tax credit.

This credit applies where tax has been paid in both countries, subject to certain limitations. However, the rules are different for those working in a country such as the United Arab Emirates, where there is no income tax.

Travellers who earn below the R1.25 million threshold from working outside South Africa will not be subject to any income tax, since the law of both countries exempts their salary from taxation.

“Before you accept a job abroad, you should seek advice from a tax consultant on what the tax implications will be,” Nedbank said.

According to Nedbank, travellers also need to review their South African bank accounts before leaving the country. This entails notifying their bank of the intention to use the accounts abroad.

Some banks allow customers to activate their debit or credit cards for international purchases, allowing them to control their accounts even when abroad.

“However, paying for goods and services in a foreign currency abroad, converting rands in your account every time, leaves you at the mercy of foreign exchange fluctuations,” the bank said.

“A foreign currency account (FCA) and a travel card are a good solution to help protect you from rand volatility.”

Nedbank advised opening one of these accounts and investing in it regularly to build up a reserve in the foreign currency needed before going overseas.

When working abroad, travellers can deposit their earnings into their FCA and protect them from sudden decreases in the value of the rand, while earning interest in a foreign currency and building an offshore nest egg.