With the Covid-19, remote working has become increasingly popular. Suddenly it is possible to retain your work while trotting the globe as a Digital nomad, exploring a new country every few months. For most individuals, Europe, Asia and South America might be the first destination that come to mind, but have you ever considered Africa? This beautiful continent has endless landscapes and cultures to explore, and definitely worthy to be on every bucket list. But what are the legal implications of working abroad without sacrificing your beloved career in your home country?
There is clearly a strong interest in the topic, judging from the significant increase in consultations I had over the past few months. This topic is not just of interest to foreigners who wish to work in South Africa, but also to large companies getting this request from their employees. I recently hosted a panel discussion for SARA, the South African Rewards Association, on this topic to discuss the practical relevance.
For example, let us assume you are a French national working for a Dutch company in Amsterdam. Your life-partner has been transferred to South Africa and will therefore obtain his own Intra Company Transfer work visa for the duration of the assignment, 4 years. You will accompany him, but wish to continue working for your Dutch employer. However, your employer has no daughter company or business within South Africa. While this might not be the typical digital nomad, the core question remains the same: would you need a work permit in South Africa?
The short answers would be no, not from an immigration law perspective.
You do not work for a local business, nor does your employer have any link or connection to South Africa. As you most likely will not be required to do any local sales or contract negotiations at all either. All South African work visa categories require a local employer or at least a local hosting entity, with the exception of the 1-year critical skills visa. Thus, our immigration system does not cater for this option at all. The same applies to all African countries. They all require a hosting local entity as an employer for their work visa categories, except for Mauritius. I will explain this option in more detail later on.
However, since your stay in South Africa is planned for more than 6 months, as the example requires 4 years, there is a real danger that your Dutch employer might be required to establish a “permanent establishment” (PE) in South Africa, as you work here. The issue of a “permanent establishment” is rather a tax issue and not an immigration issue. The potential tax liabilities for your employer are real, and often foreign employers want to avoid the danger of a permanent establishment. I am not a tax expert; thus, I will only stick to the basic principles of PE.
A PE is principally created in one of two ways:
- Where a company has a fixed place of business in another country through which its business is wholly or partly carried on (the so-called “general PE definition”); or
- If there is a person in the other country, and such person acts on behalf of the company and habitually concludes or plays the principal role leading to the conclusion of contracts (the so-called “Dependent Agent PE”).
The concept of “Dependent Agent PE” is not applicable in South Africa, but other African countries might. So, this would be one point to check before entering the country. In our example above, the dependent agent PE would not be applicable.
However, the general permanent establishment definition could be applicable. For this to be applicable, three tests must be positive.
- There should be a place of business
- that place must have a certain degree of permanence
- the business must be conducted through that fixed place of business.
These requirements usually exclude a general PE for employees working in another country due to Covid restrictions, as their stay would be temporary.
However, in our example you intend to work for 4 years from your home office for your Dutch employer. Thus, the three above criteria could very well be met and thus your Dutch employer might establish a permanent establishment after all. For this reason, I recommend that you consult your Tax expert for advice.
The usage of an “Employer of record” (EoR) service company might be the solution in this example. Such service companies, often also called Professional Employer Organisations (PEO), are increasingly relevant for providing international staffing solutions. The EoR company will employ you locally here in South Africa, where they will add you onto their payroll, pay your local income tax to our tax authorities and make sure you are compliant in terms of the applicable local labour, immigration and tax laws. The EoR company will conclude a service agreement with your Dutch employer regulating risks, payment terms and other details. The usage of PEO or EoR service companies might very well be a good answer to most of the issues that digital nomads are currently facing. From a pure South Africa immigration perspective however, obtaining the correct work visa is not that simple and you will need a work visa, as you are now locally employed.
The ICT option might also be applicable, but then a service agreement between the Dutch employer and the EoR company would be necessary to show the affiliation. Although affiliation is allowed in terms of the South African ICT context, I am very worried about the approval chances due to the complexity of this path. There is also the issue of the transfer of skills plan, and actual transfer of skills to another employee of the EoR company.
Another option could be the Critical Skills work visa. This could work if you fall into one of the categories. Often this is not the case. The last option would be the general work visa, but due to the required recommendation of the local Department of labour, I foresee major problems with this route.
In conclusion, while the usage of an EoR company solves the PE risk, it requires you to have a work visa, which will not be simple to obtain. Within a larger African context, excluding South Africa, the usage of EoR service company might actually be easier from an immigration perspective. Most established markets in Africa only require local employment and have not yet detailed the transfer of skills plan or have critical skills categories. In practice, EoR services very often successfully obtain local work permissions, allowing Remote Working as a Digital nomad.
One African country in particular is targeting digital nomads, welcoming them with open arms. Mauritius introduced the premium visa a few months ago. The requirements of the premium visa are rather simple, you must show that you will continue working for your foreign employer, have health insurance and sufficient funds. This visa has the added benefit of allowing family member to travel with you. The visa will be issued for up to one year, and if you happen to fall in love with Mauritius during that year, you are allowed to change your visa into another category from within Mauritius. The application process is straight forward. There is even clarity on tax issues, as long as you do not repatriate your income earned outside Mauritius to Mauritius.
Here is an idea for other African countries to attract digital nomads! You never know, some might make it their permanent home, start a business, or just transfer their skills to their new ‘forever home’. Because ultimately, that is every countries dream immigrant!
