Featured

What is the #ExpatTax2020 benefit of financial emigration?

Advertisements

ZERO!

There is zero benefit for most!

The impact of financial emigration on your tax residence is probably zero – there is no such a process! Be aware! Do not be tricked into huge fees!

Acquiring approval from the South African Reserve Bank to formally emigrate from a banking and Exchange (Excon) perspective is not and has never been connected to an individual’s tax residence.
Some pony tail marketing guru came up with a new term “financial emigration” and quick fox hungry South Africans, mainly professionals, journalists and financial and retirement advisers fell for the new buzz word. All the while its but a figment and at best a cleverly designed brand name
Formal emigration (also often incorrectly referred was to as Financial Emigration) is but one building block that may be taken into account to determine whether or not an individual broke his or her ordinarily tax resident status!
For expats #Saffas or @wegkaner folk in countries with whom South Africa has entered into double tax agreements (DTA) or treaties, the Excon process to formally emigrate (financially emigrate as some may think of it) is of ZERO value!

UAE, UK, USA, QATAR, Australia, most of the EU and GCC countries (but not countries like Bahrain and not the Philippines), are example of treaty countries.

An individual’s tax residence is not automatically broken when he or she formally emigrates.

The deciding factor remains whether or not an individual breaks his or her ordinarily tax resident status! However, for most in said DTA countries, residence status is not determined by ordinarily resident tests but by treaty tests

 Need more Info?

How foreign employment income tax will impact South African expats

https://www.sars.gov.za/ClientSegments/Individuals/Tax-Stages/Pages/Foreign-Employment-Income-Exemption.aspx

#taxmigration vs. #financialemigration

Advertisements
Featured

#ExpatTax2020 Turkey & UAE January 2020 UAE: Dubai &Abu Dhabi 21st

Advertisements

Hugo van Zyl CA(SA) TEP MTP(SA) is once again visiting the UAE (Dubai and Abu Dhabi) to assist expats South Africans to assess and deal with their SARS tax compliance

Trip details

8-14 January 2020

For Istanbul diary follow this link: Online diary Turkey

15- 23 January 2020

For the UAE diary follow this link and note note 21 Jan 2020 is in Abu Dhabi

The February 2019 SARS tax returns are due end January 2020.

The said trip will this ensure both your Feb 2019 ITR12 is filed on time and that your February 2020 tax return is filed correctly!

Provisional tax I hear you ask? Yes, tax residents employed outside SA and tax non-residents are deemed provisional taxpayers! No question, if you live in the UAE and you our NOT employed by a SARS registered employer, you need to file provisional tax returns!!

Tax 2020 Time lines for SA Expats

Advertisements

uae-tax-exit-summary.pdf

your ref:

#Tax2020Truth

WHAT TO DO?

Monday, 06 January 2020

UAE TAX EMIGRATION SUMMARY JANUARY 2020

our ref: UAE Tax Exit Summary.docx

General guidelines for South African Expats (#Saffas) or #Wegkaner – not employed by SA employer

There is great confusion as the solutions, products and tax process to be followed by Saffas residing AND working in the UAE (in possession of an Emirates ID card)

Foreign Earned Income refers to income from employment only, as defined in ITA section 10(1)(o)(ii)

Action points

1. If you claimed past exemption based on 183/+60-day rule you are tax resident for SARS purpose 1.1. May be incorrect, but you opted to file in terms of tax resident rules

1.2. You need to change your tax residency status based on treaty rules

2. STOP listening to ordinarily resident test, SARS days count rule of 330 days or 183 days in 2.1. They just not relevant in terms of the UAE/RSA treaty

2.1.1.Acquaint yourself with UAE/SA tax treaty DTA; 2.1.1.1. UAE Minister of Finance Tax Domicile rules

2.2. SARS publicly stated DTA is stronger than local laws

3. Read SARS draft guidelines

3.1. Financial Emigration is not the silver bullet it was made out to be

3.2. Read the FAQ document and consider Q&A 21 added 22 October 2019

3.2.1.You may legally backdate tax exit through VDP process

3.2.2. https://www.sars.gov.za/ClientSegments/Individuals/Tax-Stages/Pages/Foreign-Employment-Income-

Exemption.aspx

3.3. SARS publicly stated on this link

wegkaner@iafrica.com | cross border tax & advisory | http://www.taxmigration.com hugovz@iafrica.com | page 1 of 5| taxforum@iafrica.com

cape town| tel: +27 21 813 9775 | mobile: +27 82 55 44 831 | global expat clients|saffas

master tax practitioner (sa) | thesait.org.za member 10863551 | trust & estate practitioner – http://www.STEP.org m.com (tax) |saica ca (sa) 00251094 | sars pr-0017096 | twitter: @wegkaner

issued subject to disclaimer and confidentiality clause on the last page

All services provided in terms of South African law & arbitration rules, providing a SA perspective, despite the client, the service providers and or the intermediary residing in another tax jurisdiction.

UAE Guidelines 2020

3.3.1.An individual who is deemed to be exclusively a resident of another country for purposes of a tax treaty is excluded from the definition of “resident”. It follows that while an individual may qualify as a resident under the ordinarily resident or physical presence tests, that individual will not be regarded as a resident for South African tax purposes if that person is a resident of another country when applying a tax treaty.

3.3.2.Acquiring approval from the South African Reserve Bank to emigrate from a financial perspective is not connected to an individual’s tax residence. Financial emigration is merely one factor that may be taken into account to determine whether or not an individual broke his or her tax residence. An individual’s tax residence is not automatically broken when he or she financially emigrates

4. Verify your tax status with SARS and ensure you registered as a provisional taxpayer 4.1. Employed by non-SA company or employer without SARS PAYE number = ProvTax 4.2. Call SARS on +27 12 317 2000 with your SA ID number in hand

5. Decide on your tax emigration or tax exit date

5.1. Exit tax due the day before you became solely tax resident in the UAE 5.2. Obtain best possible and reliable tax advise

5.2.1.Ask someone who has been doing this since 1994, who was around in 2001 when tax laws in SA changed

6. Obtain UAE Minister of Finance confirmation of tax domicile state (TDC) in the UAE

6.1. Align with treaty, your own arrival date and income confirmation from UAE employer 6.2. DTA does not insist on it but spend the AED 2 200. Money well spent

7. File your current and arrear provisional tax returns with SARS – IRP6 – your deemed liable, no question about this

7.1. 31 August 2019 return is overdue 7.2. Last business day of February 2020

7.2.1.Exit tax if applicable and normal tax on other taxable income

7.3. Last business day of August 2020 – see more below in timeline section 7.3.1.First #ExpatTax2020 payment date – you must pay in advance

7.3.1.1. No ProvTax if annual foreign earned income including fringe benefits<R2m

7.3.1.2. No ProvTax if YTD foreign earned income below R1m

8. Tax resident: Determine your taxable income applying SA tax rules i.e. value the UAE benefits using SA

tax rules in ITA, Schedules 4 and 7 to said ITA. Ignore R1m deduction for now

8.1. Add other deemed income such as capital gains, trust distributions and excluded local SA dividend

income.

8.2. One done, apportion R1m amongst foreign earned income (cash vs fringe benefits)

8.2.1.See SARS draft guidelines, very technical at this stage

9. Tax non-resident – no need to follow 8 above

hugovanzyl.com.com | cross border tax & advisory | bcbadvsisory.com hugovz@iafrica.com | hugovz@iafrica.com | taxforum@iafrica.com Cape Town Document7 Page 2 of 5

All services provided in terms of South African law & arbitration rules, providing a SA perspective, despite the client, the service providers and or the intermediary residing in another tax jurisdiction.

Timelines

10. 31 January 2020

UAE Guidelines 2020

10.1. Provisional taxpayers tax filing deadline via eFile

10.1.1. Tax resident working for employer without SARS PAYE number- deemed ProvTax payer

10.1.2. All non-residents with SA source i.e. SA rental income

11. 1 February 2020

11.1. If not yet tax emigrated or failed to notify SARS for 2019 or earlier year: 11.1.1. Obtain UAE tax domicile certificate (TDC) and entry and exit report

12. 28 February 2020 (last business day in South Africa) 12.1. Pay provisional tax

12.1.1. Tax residents: on worldwide income; or

12.1.2. Tax non-residents: only on SA sourced income 28 February 2020 (last business day in SA)

12.1.2.1. Tax emigrated in the last 12 months: Include CGT in unrealized gains 13. 29 February 2020 Last day of SARS tax year 2019/20

13.1. Full exemption foreign earned income comes to an end 13.1.1. Based on either treaty rules or unilateral 183/+60-day rule

14. 1 March 2020 – first day SARS tax year 2020/21

14.1.1. The new capped foreign earned income exemption applies as of 1 March 2020, hence

#Tax2020

14.1.1.1. SARS tax year ending last day of February 2021

15. 1 July 2020

15.1. Feb 2020 tax filing season should commence

15.1.1. Make sure you obtained TDC 16. 31 August 2020

16.1. First provisional tax payment date for residents and non-residents

16.1.1. Non-residents on SA sourced income only, based on last assessment or actual half annual

income based on YTD income

16.1.2. Residents: Earned income YTD <R1m = nil return unless there is SA sourced income

16.1.2.1. Earned income YTD > R1m, pay on excess above R1m

16.1.2.1.1. Aug & Feb ProvTax NO longer equal in value

16.1.2.1.2. R1m exemption claimed immediately not apportioned over 12 months 16.1.2.2. Earned income 2021 tax year > R2m, divide by half, deduct R1m and pay on one

half to the extent it exceeds R1m

17. 30 September 2020

17.1. Voluntary top-up third ProvTax

17.1.1. If you tax emigrated during Feb 2019/20 tax year (before 29 Feb 2020), ensure you paid

adequate exit tax

Issued on January 6th 2020 by

hugovanzyl.com.com | cross border tax & advisory | bcbadvsisory.com hugovz@iafrica.com | hugovz@iafrica.com | taxforum@iafrica.com Cape Town Document7 Page 3 of 5

All services provided in terms of South African law & arbitration rules, providing a SA perspective, despite the client, the service providers and or the intermediary residing in another tax jurisdiction.

Disclaimer:

UAE Guidelines 2020

Do not rea this document in isolation. Ensure you have familiarised yourself with the official SARS pages, publications and comprehensive guides

Speak to a tax adviser with adequate tax experience not interest in selling “financial emigration” as a product. Find a tax act solution that works and stood the test of time

Online dairy:

https://calendly.com/taxforum/dubaijan2020?back=1&month=2020-01

Cape Town | South Africa 06 January 2020

Disclaimer & Confidentiality warning:

This document is not only confidential and privileged, but it was also sent in terms of the hugovanzyl.com standard terms and conditions as set out our web page – no exception. Merely relying on or acting on (which shall include replying to) this document /e-mail or the content hereof, is adequate evidence of your acceptance of our standard terms and conditions.

If you are not the intended recipient, please delete from your system and notify the sender now; you may not use, disclose, distribute or copy it. Anyone who communicates with us by e-mail is taken to accept the risks in doing so.

Emails are subject to data corruption, delay, an interception and unauthorised amendment.

Nothing in the message is capable of or intended to create any legally binding obligation, and it is not supposed to provide neither legal advice nor financial planning advice.

All tax mandates are signed between the taxpayer as identified and the tax practitioner being Hugo van Zyl MTP(SA) SARS registration PR- 0017096. It is a mandate finally accepted and adjudicated in terms of the laws of the Republic of South Africa. It follows that all disputes, legal action and arbitration hearing shall not only be conducted in the Republic of South Africa, but also in terms of the laws of the Republic of South African.

hugovanzyl.com.com | cross border tax & advisory | bcbadvsisory.com hugovz@iafrica.com | hugovz@iafrica.com | taxforum@iafrica.com Cape Town Document7 Page 4 of 5

All services provided in terms of South African law & arbitration rules, providing a SA perspective, despite the client, the service providers and or the intermediary residing in another tax jurisdiction.

UAE Guidelines 2020

Online dairy 15- 23 January 2020 (21 January Abu Dhabi) http://www.calendly.com/taxforum

hugovanzyl.com.com | cross border tax & advisory | bcbadvsisory.com hugovz@iafrica.com | hugovz@iafrica.com | taxforum@iafrica.com Cape Town Document7 Page 5 of 5

#ExpatTax2020 #Tax2020Truth What's your next? Tax Shock awaits but you have time for now, but act immediately

Advertisements

Online diary – secure your slot TODAY

You “emigrated” from South Africa! Really? You 100% sure? Does SARS agree? Wish to know how you can check up on SARS status?

Why not arrange to meet Hugo while he is in Dubai en Abu Dhabi? Even if you have not commenced the process, there is adequate time to find the most appropriate and affordable solution! Remember we can invite your SA accountant along to attend by phone!

My diary is online and the fees are fully transparent

What’s next? Read more about the post emigration TAX SHOCKERS and Curve Balls to dodge, now that you are out of the residency system.

Did you correctly emigrate from South Africa and what is you understanding of “emigrated”?

#Taxmigration is our hashtag. The Income Tax Act use the words “cease to be a resident”. Tax specialists, like writer prefers to add the word <tax> resident to ensure we on the same page! The reason being, there is a difference between a tax resident and and an Exchange Control resident! Oops, your #financialemigration sales person did not disclose this to you?

Being a person not resident for tax (tax non-resident) brings certain benefits, obligations and and often switch off certain tax exposures, but not all! Sorry, not home and dry as yet!

Once solely tax resident in a treaty country, you may escape SARS Income Tax but not SARS Estate Duty!

Yes, countries like Mauritius and the UAE have forced heirship or Sharia Succession rules, yet this does not remove the estate duty (situs or death taxes) in South Africa! What was not inherited by your spouse, will trigger SA Estate Duty to the extent the value exceeds R3,5m a year!

Once you have notified SARS of you ceasing tax residency, you need not only pay the exit tax, you need to update your SARS efile profile to reflect your foreign residential and postal address. How sure are you that your #financialemigration consultant correctly executed the SARS update?

Using foreign mobile numbers remain to be somewhat of an issue, yet you can change the security settings (oneFile) to send a verification pin to your email address. Oh no, don’t tell me you allowed your #financialemigration consultant sole access? They did not inform you that you entitled and best advised to ensure you have equal and full access to your own eFile profile? Bad bad bad! Very bad!

Tax migration does not equate to a formal or financial emigration and vice versa! Formal or financial emigration as the product punters refer to it, does not deal with or sort out your tax residency status! Tax exit or #taxmigration is indeed the first step to formal emigration at a later stage. At the status, if ever, when it makes sense to break ties with your SA bankers!

Yes, we advocate you at least complete the less expensive tax emigration! This is indeed the actual process you need to ensure is in place before you even consider formal emigration!

Yes please!! Do ensure you complete the more certain, #taxmigration soonest! Tax exit or ceasing tax residency is indeed not as restrictive as formal or financial emigration. Using the DTA of tax treaty rules to move your tax residency from SA to another country, does not require you to lie about your intention NEVER to return to SA. Most of us, on work permits only, know deep down there is always an option to move back!

Best part of treaty based tax residency change, is that the counting and recording of days are no longer the bain of your life! Days counting for most people, becomes totally irrelevant! It begs the question why does so many so called taxperts spend so much time on the physical presence test, when its so irrelevant for most! Born in SA or ordinarily resident in SA taxpayers can also read over the garbage on 330 days outside SA test! Its just so irrelevant for most #Saffas and @wegkaner taxpayers.

Formally emigrated: what now? Home and dry? No!!!! SARS has repeatedly confirmed that formal or #financialemigration does not guarantee that you are no longer ordinarily resident in SA! Intention not to return may be indicated but its not guaranteed as you only undertook, to for period of 5 years only, not to return to SA without notifying the SARB aka FinSurv or Excon at the Reserve Bank – there was no undertaking to SARS not to return to SA.

It follows that you are obliged to annually or at least on a regular basis (or for example when you inherit or buy SA situs assets) re consider your tax residency and the DTA rules. Yes, the tax treaty or DTA definition of resident, read with the relevant treaty tie-breaker tests, can transfer a person not ordinarily resident in SA, back into the tax residency fold. DTA rules trump the ITA definition of resident. Also, we remind you that ordinarily resident is not a defined term!

Formally emigrated as no longer ordinarily resident and only relied in the formal emigration service provider filing and obtaining a tax emigration clearance certificate and you feel relieved? Shocker, you at risk!

Persons basing tax emigration on ordinarily residency being terminated is advised to obtain a Tax Administration Act section 223 opinion explaining why you considered no longer ordinarily resident. Second shocker: Said section 223 clearly state the company that filed for your formal emigration may NOT issue the written opinion! An independent SARS approved tax practitioner must issue the certificate. No, not a lawyer! Rather go for a Master Tax Practitioner as said person is TAA approved and best placed to issue the opinion

Wish to arrange an e-Meeting using Skype or Whereby.com/Taxforum

Need more information? Or a quote? Visit our online diary, reflecting our availability and fees online calendar

Online diary for Jan 2020 or earlier eMeeting

What Expats Must Do Before 1 March 2020 with Hugo van Zyl – PROpulsion Podcast

Advertisements

Ep. 16 – South African Expat Tax Changes and What Expats Must Do Before 1 March 2020 with Hugo van Zyl – PROpulsion Podcast
— Read on www.propulsion.co.za/ep16/

Hugo van Zyl CA(SA) TEP MTP(SA) is well-known for his expertise in cross-border tax and financial planning.  It is no surprise that his colleagues refer to him as “ask Hue’Gle” when all other resources fail.  His track record speaks for itself.

In this episode, we get into the nitty-gritty of the changes to the so-called “expat tax” in South Africa.  With the new changes already enacted into law, the implementation of the new changes has been deferred until 1 March 2020.  Many expats have not considered the impact this will have on them.  Financial Advisors are just as confused in many cases and are at a loss when having to point their clients in the right direction.

Some of the aspects we discuss include:

We also discuss Circular 4 of 2014 that caters for life and living annuities to be paid directly to a foreign bank account if the Annuitant has a foreign FICA address.  Such payments will not affect the person’s discretionary travel allowance nor their R10m annual allowance.

Minutes after the interview, SARS issued an FAQ document that confirms everything we discussed in the interview.  You can download it here.

SARS FAQ: Foreign Earned Income Exemption

Advertisements

#Tax2020Truth on the Capped Foreign Earned Income Exemption being R1 million as from 1 March 2020. First tax due 31 August 2020.

SARS now has a dedicated page dealing with:

FOREIGN EMPLOYMENT INCOME EXEMPTION

On this page there is two newly (October 2019) released documents, the one a work in progress (draft Interpreration Note 16 Issue 3) and a FAQ document named: SARS legal counsel, on 8 October 2019 issued a FAQ document,which is neither an interpretation note nor is it a binding ruling.

It fails the actual need for total certainty, yet it goes a far away to clarify some of the questions and most importantly, it removes the false news and scaremongering by those selling financial emigration as if its something of a miracle.

There is no benefit in a detailed summary, the document reads rather easy and it is more important to note what is not addressed:

  1. How to update SARS on tax emigration in a past tax year. There is sadly no reference to VDP options
  2. It does not clearly state that tax emigration based on a treaty position, is adequate. It only refers to ordinarily resident exit options.
  3. It fails to use the correct terminology being formal emigration.

Have any questions?

What is the other commentators in the market saying?

The spokesperson managing the TPC Facebook page (shall we call him Barry for argument sake?) wrote and we quote [we added the numbers as reference to our comment below the quoted text]:

“Some Q&A that might be useful to members:

What is FE ?.

Financial emigration is a formal dual process [1] of doing formal emigration via the SARB – South African reserve bank in conjunction with “declaring your emigration to SARS” and your intent to be non-resident of SA.[2]

Your assets [3] are logged with reserve bank and sars and the bank of your choice becomes your agent at which you will hold a non resident [4] account through which you may cash out RA’s , assets and move the monies abroad.

It clearly shows your intent to SARS of not being a ordinary resident. [5] Post FE you must still adhere to the residency tests as prescribed in the tax laws. [6]

What is tax migration or tax [7] immigration?

Tax migration [7] IS NOT A TAX TERM and is nowhere to be found in the SA tax laws or SARS website!! It is a term used by some service providers that basically tries to “package” becoming a non tax resident with SARS. [7] There is no specific sars form/application/guideline or interpretation note on doing this. [8] It is relying on that in the year [9] you leave sa that you declare yourself non resident with SARS , that it triggers a exit tax (CGT- capital gains tax event) and follows to a SARS audit of you in which you will then have to proof by means of DTA- double tax agreements , TRC – tax residency certificates and by any /all other indicators that you permanently [10] reside abroad (housing contracts/employment contracts/days abroad etc etc) to get sars acceptance that you are non resident [11] .

Anyone trying to sell you tax migration is merely going to be charging you consultancy fees for the above named service and do or advise you on filing said  [12] exit tax return. Which is totally normal/legal as in providing a service but its also no “silver bullet” [13]

Do i still need to submit tax returns being resident or non resident in terms of SA tax laws?

As long as you keep/maintain any financial footprint [14] in SA its advisable to continue submitting tax returns. Once you have zero further financial  [15] assets/holdings in SA you can try to de-register from SARS completely”

Hugo van Zyl CA(SA), Trust & Estates Practitioner and Master Tax Practitioner (South Africa) comments, using the number he inserted in the quote above:

  1. Financial Emigration is NO process. It is a brand name for a specific service provider, which is very close to TPG. The process is nowhere documented or referenced in any tax or banking act. The said service provider initially defined it in one way and then later changed their explanation.  The correct terminology is formal emigration which places on record formal emigration in terms of SARB rules. It is indeed subject to SARS clearance and approval yet the approval or tax emigration clearance ceritificate (as quoted by Barry on TPG pages) does not even mention tax residency status. Source: Resbank or SARB webpage and we quote the terms and process: “they are satisfied that the insured has formally emigrated and has placed their emigration on record with the Financial Surveillance Department”. It does not refer to SARS at all
  2. TPG argues or pretend to argue that all that is required is to “declaring your emigration to SARS” and your intent to be non-resident of SA (sic). Firstly, your intention from a SARS perspective, speaks to your resident status in terms of tax law. Never ever has SARS or SARB required any emigrant, to state his intent to be a non-resident of SA and to renounce his nationality. Do not be mislead, you can tax and or formally emigrate and retain your SA nationality, and in fact retain (with permission) dual or multiple nationalities. You do not need to give intent to become a non-resident SA. They probably suggested you need to declare your intent to become tax non-resident. Luckily SARS has already commented on the misleading TPG statement that intent and FE (jointly) are adequote to break tax residency. We quote SARS saying:    “A number of factors must be taken into account to make such a determination. Interpretation Note 3 (Issue 2): Resident: Definition in relation to a natural person – ordinarily resident sets out the list of factors that will be taken into account to determine whether an individual is ordinarily resident for tax purposes in South Africa.” In the FAQ on foreign employment exempt income SARS categorically states: “Acquiring approval from the South African Reserve Bank to emigrate from a financial perspective is not connected to an individual’s tax residence. Financial emigration is merely one factor that may be taken into account to determine whether or not an individual broke his or her tax residence. An individual’s tax residence is not automatically broken when he or she financially emigrates. The deciding factor remains whether or not an individual ceased to be ordinarily resident in the Republic.” Also, intent is but one test of many others as SARS repeatedly state in their publications. TPG and many of their supporters never discuss nor do they deal with the entire IN 3 on ordinary resident tests
  3. This is just not true. Your assets are not just logged with SARB. Only the SA situs assets (held in own name or indirectly as a local trust funder or local trust beneficairy) subject to Excon control as so called blocked assets are listed on form MP336(b) and then placed under control of an authorised dealer. Logging is just not adequote and SARB is not concerned about your regularised foreign assets. They do ask the value of the funds remitted out but they do not ask for current value nor do they concern themselves with the nature thereof, provided it did not create a loop and you did not make it available to another Excon resident. SARS, on the other hand, should you not have tax emigrated, insist on a global balance sheet. Should you have tax emigrated in years prior to the formal emigration tax clearance application, they are only concerned about SA situs assets and SA sourced income potential i.e. they also want you to list trust held assets and retirement funds.
  4. This is not true. It is not a non-resident account in the true sense of the word. It is a blocked or capital account. One can, for example request that listed and unlisted shares held on the capital account, be transferred in lieu of FCA, to a non-resident account. There is thus a significant process to have your SA assets transferred from a capital (aka blocked) account to a non-resident account. Only own name local SA assets are blocked, and trust held assets are placed under restriction but not blocked or held on capital account. The restrictions imposed, forces the SA trustees to transfer trust assets and or income, vested in the name of the emigrant, onto the blocked or capital account. The exact rule reads: “Where an emigrant’s remaining assets are declared on the Form MP336(b), the Authorised Dealer under whose administration the emigrant’s remaining assets are placed must notify all applicable parties of the emigrant’s status and ensure that any proceeds derived from such assets are credited to the emigrant’s capital account”
  5. This is not true. Formal Emigration does not show intent to no longer be ordinarily tax resident. The FE process only calls upon you to commit not to return and seek employment for the next 5 years. SARB rules read: “Private individuals regarded as residents by the Financial Surveillance Department who are leaving South Africa to take up permanent residence in any country outside the CMA must apply before departure to be accorded the facilities set out below”. There is no requirement in the Formal Emigration process or rule that you agree or intend not to be ordianrily resident in SA. You can indeed be a permanent resident (PR) or national of Malta (passport holder), formally emigrate and remain ordinarily resident for tax purposes. Your status as resident, as defined in terms of ITA section 1, is determined by the double tax agreement (DTA) and not by your bank status as formal emigrant or your PR status in Malta.
  6. Add to this, one has to always consider the DTA tie breaker rules and the DTA tax residency rules as well. Reading the SA Income Tax Act (ITA) ONLY, may leave you with some nasty surprises
  7. The word is migration, not immigration as in the sub-heading. It is indeed NOT tax law defined, as its writer’s brand name and used to describe not only the process but also the outcome or DTA tie breaker definition, read with the ITA section 1 defintion. Writer is quick to admit #taxmigration is not a defined term, yet Barys close associates and the source of his material is on record as stating: “Financial Emigration and formal emigration, while similar in process, are not exactly the same. Formal emigration does not include the important steps of ensuring that tax residency is indeed ceased. Therefore, Financial Emigration is a two-component process (SARS and SARB) whilst Formal Emigration is purely a South African Reserve Bank (SARB) process”. One then is tempted to beg the question: Barry, where did they found this financial emigration definition? Could you find it in the laws of SA?
  8. TPG and Barry often argues that “There is no specific sars form/application/guideline or interpretation note on doing this. [tax migration]” yet SARS tax returns ask the question (irrespective if your formal emigration status) did you cease to be a tax resident? SARS FAQ document in question and answer 20,  also explains the options and then there is the VDP option. Clearly comments by someone perhaps nto registered or trained as a tax specialist? Furthermore SARS and Treasury formally endorsed tax migration as an option, albeit through the VDP process many years later. Treasury responded to TPG’s “Comment: This proposal will lead to an accelerated breaking of SA tax residence, including people who have been out of the country for more than 5 years. Some had envisaged retirement in SA, but will now not be willing or able to do so. [Treasury’s public] Response: Noted. The formalisation of the tax residency status of South African tax residents who left the country many years ago is to be encouraged. South Africans who are no longer tax resident is welcome to return to South Africa in future and there are no barriers from a tax perspective to do so if their tax affairs are in order. 
  9. We are amazed but this comment. Clearly the working of a DTA is NOT understood. The tax emigration or exit based on a treaty is often in years subseqent to departure from SA. Departure days, intent and number of days outside SA are not DTA tie-breaker tests and this comment is irrelevant and incorrect assumption of DTA rules.
  10. Same as for 9. DTA tie breaker tests does not include the test to never come back to SA. One can indeed be tax non-resident because of a DTA tie-breaker yet remain ordinarily resident in SA. The purposes of the DTA is to assist those not able nor wishing to break the ordinarily resident indicators.
  11. No,  SARS acceptance is not the test. DTA tie-breakers are the test and if SARS disputes the outcome one can approach the other countries competant authority. Not an approach we advocate but use SARS audit to scare taxpayers away from tax exit or tax migration based on DTA, is to lie and suggest breaking ordinarily residence will never be subject to stringent SARS scrutiny.
  12. Earlier Barry or then TPG on Facebook argued their is no process or form to tax emigrate and now he refers to “said form”. So what is the position TPG? There is a “said form” or  “There is no specific sars form/application/guideline or interpretation note”.
  13. Tax has no silver bullet, we agree. Tax migration is just one solution, the cheaper, more reliable and less restrictive process.
  14. Footprint and financial assets? Really? What about immovable assets held, beneficiaries of local trusts? Footprints may intend to encapsulate all but lets be fair to the readers and list all the nigly bits that may keep you onboard SARS’ ship

Have more questions on TPG arguments you saw on Facebook?

#Expats vs. #SARSCompliance (#Tax2020Truth)

Advertisements

Some interesting tax facts that may cause panic!

Time clean up and tidy up your #SARSCompliance and file the February 2019 tax return.

Not tax registered? Follow this link to register or call on us, and we can assist.
If you cannot be registered through your employer you will need to visit a SARS branch to register.

Don’t know your number? Time to call SARS as they will assist based on your SA ID number.

Here is some interesting fact which tax resident Expat #Saffas need to consider:

Ensure SARS knows and confirmed you are tax non-resident. It is not good enough to be tax deregistered and there is no comfort in a dated tax clearance or tax good standing certificate. Assuming you have not notified SARS that you are tax non-resident, herewith then some interesting facts:

  1. You earned remuneration for foreign services rendered, and then the following rules applies:
      You are obliged to file or submit a return for the 2019 year of assessment, despite your income being below R500 000.
      If your employer is NOT tax registered with SARS (i.e. you did not receive an IRP5 or IT3) you are deemed to be a provisional taxpayer and you need to also file the IRP6 forms for August 2018 and February 2019
      • It follows that if you sold an asset, where ever in the world, the CGT was due by end of the provisional tax period (either August or February) and NOT on assessment.
      • It follows that most expats, until they have successfully changed their tax status with SARS to that of tax non-resident, will be liable for provisional tax payments and were obliged to file said provisional tax returns
  2. You are not employed, on a spousal or sponsored Visa in another country. Do you need to file a tax return? Most probably YES! Why?
  1. SARS issued a tax return? Then you are obliged to file. No exception and do ensure you have filed your provisional tax returns as well.

Should you argue that you have told SARS you left SA, and were given a tax good standing letter of some sort, you remain to be SA tax resident in SARS’ view. Leaving the country and notifying SARS is not adequate. To be tax non-resident you need to ensure that:

  1. Your notify SARS of the fact that you are tax non-resident. Just saying you leaving the country is not adequate
  2. You need to disclose to SARS the reason why you are considered tax non-resident, being either no longer ordinarily resident in SA or being deemed exclusively tax resident in terms of an income tax treaty with another treaty country
  3. If you are tax non-resident in terms of treaty rules, relax the days in SA rules can most probably NOT bring you back into the tax system as a resident. The reason being that fact that you most probably ordinarily tax resident yet defined not a [tax] resident because of the treaty. The physical presence test or the days test making one resident, only applies to persons not ordinarily resident i.e. immigrants coming in for the first time, from another country, availing to a short term work permit (vs. a permanent residence permit)
  4. Very few South Africans can claim tax non-residency bases on the days outside SA. It is just not relevant to most born Saffas
  5. SARS considers your non-South African spouse, you met in and married while you were both in SA, as most probably tax resident i.e. there is no requirement to hold a permanent residence or to have been employed in SA.

Need some more information? Feel free to follow the link and make contact with Hugo van Zyl

Other blogs by the same author?

-33.912908718.3904912

#taxmigration vs. #financialemigration

Advertisements

And the scoreboard reads:

#taxmigration                    10        

#formalemigration              5         

#financialemigration       0 (failed)

Eventually, we have SARS buy-in and confirmation that formal emigration is not a tax act process.

Yes, SARS punched the punters of financial emigration, a bloody if not deadly blow!

Financial Emigration or whatever the punters there of whish to call it is now exposed as

#financialemigration is 2019 False News

of note!

What we now need is SARS and all tax practitioners to stop using a brand name to refer to a SARB process referred to as “to formalise their Emigration ” an Exchange Control resident

I am often challenged about the term #taxmigration not being defined or referred to, anywhere in any tax act! It is correct, it is not a defined term, it is my brand name hence http://www.taxmigration.com

Equally so, financial emigration is a brand name and through rather controversial press articles the group behind the name got the world to use their brand name. Credit to their marketing strategy but it is now time we go back to basics and true facts!

Formal Emigration is the correct and preferred word, and hopefully, soon the following SARS extract will correctly refer to Formal Emigration

What is the impact of financial emigration on tax residence?

“Acquiring approval from the South African Reserve Bank to emigrate from a financial perspective is not connected to an individual’s tax residence. Financial emigration is merely one factor that may be taken into account to determine whether or not an individual broke his or her tax residence. An individual’s tax residence is not automatically broken when he or she financially emigrate. The deciding factor remains whether or not an individual breaks his or her ordinary residence.”

Source: SARS webpage

The above extract is not necessarily 100% correct!

The last sentence should perhaps have read:

The deciding factor remains whether or not an individual breaks his or her tax residents status because of DTA or tax treaty rules and tiebreakers or because they are truly no longer ordinarily (yes, not ordinary but ordinarily) resident.

The above-mentioned extract is not the only place where the SARS webpage needs urgent attention. The following FAQ extract is also incorrect or at least incomplete:

What qualifies an individual as a non-resident? 

An individual is regarded as a tax resident of SA if he or she is ordinarily resident in South Africa or meets the requirements of the physical presence test. If neither of these applies, the individual will be regarded as a non-resident. 

For more information on these two tests, please refer to the Guide on the Residence Basis of Taxation for Individuals 2008/2009.

Source: SARS FAQ pages

The correct wording, we respectfully submit should be:

What qualifies an individual as a non-resident? 

An individual is regarded as a tax resident of SA

if he or she is ordinarily resident in South Africa

or

meets the requirements of the physical presence test.

If neither of these applies,

or should a person be deemed to solely tax resident in a DTA or treaty country,

the individual will be regarded as a non-resident. 

The SARS Glossary R page is indeed technically more sound where it states (and we selectively quote):

Resident

As defined in section 1 of the IT Act– Includes: Any natural person who is ordinarily resident in South Africa; or Any natural person who complies with the physical presence test; and …, but: Excludes any person who is deemed to be exclusively a resident of another country for purposes of the application of any agreement entered into between the government of South Africa and that other country for the avoidance of double taxation.

Source: SARS Glossary R

Formal Emigration vs. Financial Emigration- what is the difference?

There is no such process as financial emigration! It is a brand name cleverly marketed by certain product suppliers. Tax law solution (to cease tax residency as envisaged in ITA section 9H) purposefully (or is it dangerously?) confused with a lucrative business to assist with Formal Emigration

What then is the true wording or correct SARB terminology to use and what is the source for this?

We quote from SARB FAQ pages:

In terms of exchange control policy, private individuals (natural persons) who reside permanently in a country outside the Common Monetary Area are required to formalise their emigration by completing a Form MP336(b).

In conclusion

We call on all tax practitioners, authorised dealers, journalists and forex dealers to rather revert to the correct terminology:

Formal Emigration

Resident – the South African Conundrum for UAE based Expats

Advertisements

We in the UAE 12-20 September 2019

The conundrum faced by most South Africans

Do not believe the articles and publications suggesting all SA Expats face a new tax charge as of 1 March 2020 (#Tax2020)

Only SA tax residents not having completed tax emigration (#taxmigration) not necessarily #FinancialEmigration, need to consider the new rules.

Want to ask me why? Make contact or book a session on SKYPE or Telecon or 1on1 meeting or meet us in Dubai

What must you do? Blog TAX EMIGRATE – easy as that but painful as you may face a tax exit charge (section 9H of the Income Tax Act)

If ever you are told #FinancialEmigration (FE) is the only way to ensure tax emigration to tax non-resident status, ask the tax practitioner to explain these two quotes taken from Interpretation Note 3 (Issue 2):

“…a natural person may be resident in the Republic even if that person was not physically present in the Republic during the relevant year of assessment.” Page 6 Para 3

#Tax2020Truth is that the answer maybe in your DTA or double tax treaty read with the definition of “resident” in section 1 of the SA Income Tax Act

“The concept of ordinary residence must not be confused with the terms “domicile”, “nationality”, “citizenship” and the concept of “emigrating” or “immigrating” for exchange control purposes.”  Page 7 Para 2

Need help?

Who then is a resident? If you live in a treaty country (UAE, USA, UK and all EU Countries) you are most probably ALREADY tax non resident and need not worry about #Tax2020. You also need not financially emigrate.

You do not use the #FinancialEmigration process, however should you opt to do so, for whatever reason, do remember that you will be regarded as tax non-resident, but your relationship with SARS and the tax compliance in SA, will not be brought to an end. In fact, you will remain on the SARS register and should remain tax registered (albeit paying tax on SA sourced income and assets) until there is no more remaining emigrant assets (previously “Blocked Assets”.

Read more on the SARS page HOW TO TRANSFER BLOCKED FUNDS?

SARS is very clear on the topic:

Resident

As defined in section 1 of the IT Act– Includes: Any natural person who is ordinarily resident in South Africa; or Any natural person who complies with the physical presence test; and Any person (other than a natural person) which is incorporated, established or formed in South Africa or which has its place of effective management in South Africa, but: EXCLUDES any person who is deemed to be exclusively a resident of another country for purposes of the application of any agreement entered into between the government of South Africa and that other country for the avoidance of double taxation.

What is the missing words? There is NO reference to a person having financially emigrated!

It is however true that SARS do agree on their Tax Compliance Status pages that:

          “In terms of the SARB exchange control regulations, this is when a taxpayer has formalised emigration with SARB. The taxpayer will be regarded as non-resident by SARS”

The date you became tax non-resident, will however be determined, in most cases by the treaty applicable to the country where you are now tax resident.  A list of tax treaties on DTA Pages on the SARS web pages

Expats – the questions you should be asking

Advertisements

Looking for the last blog? Follow this link

How foreign employment income tax will impact South African expats

Blog updated 3 February 2019

#Expats

– the questions you should be asking

Expats living outside SA must first answer the following questions before they agree to emigrate financially:

  1. Provide a family structure and background information on the immediate family, i.e.:
  2. Married, single, children?
    • Do your spouse and all your minor children reside with you in a foreign country
      • If not, provide some background information on the location and reason therefor, concerning your immediate family. Any intention for them to join you soon?
  3. Your family home in SA:
    • Did you sell or rent it out? If rented out, is it a long-term rental agreement?
  4. Do you own a holiday or house on the family farm, always available to you?
    • When you and you and the family visit South Africa, where will you reside?

https://taxmigration.com/contact/

And now the questions we will be asking:

  1. Will this be the same for you, travelling all by yourself on a business trip?
  2. Where do you live? Country, Province/State and City
    • Rental property or owned by the family, directly or indirectly via a family trust?
  3. Did you avail to an investor visa, e. deposited some funds with the foreign government or bought/rented a qualifying property (Malta, Golden Visa etc.?)
    • If so; how long ago and have you spent substantial time in the said property?
    • If not, explain your intention with the property or investment?
  4. Where were your born and how long did you sta in SA?
    • Provide some information on the passports ou held?
    • If not born in SA, when did you arrive in SA?
      • Wht was the reason for coming to SA?
    • What was the reason for leaving? Job, secondment or a family decision to find a new home country?
  5. Can I avail to tax treaties and be considered tax resident in my new home, as this is not subject to financial emigration?
    • If yes, on what date was the tax exit?
    • Do you pay income tax, in the new home country on sourced income only or worldwide income?
    • Have you ever obtained a tax residency certificate from the new county’s tax authority?
  6. Can I claim tax credits in SA, as I have paid the necessary tax in the country of employment?
    • Most countries, apart from the UAE, has the ability and intention to tax you on locally sourced income. Yes, even “tax havens” such as the Channel Islands do charge a personal tax on remuneration earned by employees residing in their country
  7. It could be that your employer is paying on your behalf, do ask the HR department
    • If you are not in a treaty country, can I tax emigrate based on facts and intention?
    • Could the FE option be part of the building blocks to show the intention to exit South Africa and the SARS tax system as ordinarily tax resident?
    • If so, was the tax exit date this year or sometime in the future?
  8. Why would you consider or wish the complete the FE process? Here are some reasons:
    • To cash out a retirement annuity
    • To be able to re-invest into SA via my offshore trust or non-SA company to ensure I am not exposed to SA estate duty
    • To exit large funds (more than R20m per family) sourced from past savings or huge inheritance?
  9. Why do you think do service providers place so much emphasis on FE, insisting I incur the huge costs?
    • Should I not obtain a formal tax opinion from a person not selling FE to one and all, but only to persons that could show a clear benefit?
    • Did you pay your exit tax (CGT in terms on section 9H of the SA Income Tax Act)? If so: in which tax year?
  10. Do you need to transfer funds from ZA Rand to foreign currency and vice versa?
    • Provide some additional information as to the reason, monetary value and the life events that may impact on this, e. sale of a house or parents being supported from abroad, passing on
  11. Where do you intend to retire? Back in SA?
    • Irrespective of retirement plans, do you intend to return SA at any given time?
      • Timelines and life events that catapult you into making this decision?

Once you have considered all off the above, feel free to be in contact.

 

Cape Town

3 February 2019

 

#financialemigration #Saffas #Expar #Taxmigration #Wegkaner #taxemigration #formalemigration

Open chat
Good afternoon

How can we assist you? Why not send an email or detailed document to taxforum@iafrica.com
Powered by