Featured

SARS FAQ: Foreign Earned Income Exemption

#Tax2020Truth on the Capped Foreign Earned Income Exemption being R1 million as of 1 March 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?

Featured

What is the #ExpatTax2020 benefit of financial emigration?

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.

Don't be conned by good marketing skills to extract huge fees for financial emigration

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

Featured

The final countdown to #ExpatTax UAE Visit January 2020: Dubai and Abu Dhabi

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

  • No doubt the the R1m capped exemption on foreign income (commencing for SA tax resident Expats) will be the most debated and discussed topic.

  • Living as an Expat has so many other tax and exchange control issues to be addressed and therefore the focus will not be exclusively on #ExpatTax #Tax2020 #financialemigration vs. #taxemigration

Proposed visit

11 – 25 January 2020

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!!

  • At the 2019 Tax Indaba Hugo spoke about about the uniqueness of the UAE treaty. He also covered the tax exemption for expat Pilots and Cabin Crew working for Emirates Etihad Qatar Airlines ea.
  • Wish to make an appointment? Go to my online diary on ONLINE DIARY FOR UAE 2020/01
    Be so kind and share my diary with your UAE clients friend and associates
  • #financialemigration is nothing more a brand name like #taxmigration  is my brand name. Sadly, the aggressive marketing of the brand name leads many to believe it is a SARB and or SARS sanctioned process or requirement. Wrong! At best a fusion of the terms formally emigrate and tax exit or emigrate, which dangerously leaves the impression that it is tick the minimum requirement box. So far from the truth.
  • Need clarification on the confusion between a brand a TAX status change? Read #taxmigration vs. #financialemigration
  • #financialemigration does not exist in law, FACT!

  • The official guidelines refer to “formally emigrating” which is ONLY relevant for banking status and the right to cash out your retirement annuity before age 55. The tax law refers to “the date immediately before the day on which that person so ceases to be a resident”. You cease to be a resident for tax purposes, because of your tax residency status in the UAE. Ordinarily tax resident despite, the treaty trumps and you need not fake breaking ordinarily resident status by paying for hashtagfinancialemigration
  • You need assistance to ensure you taxfile on time before 31 January 2020? Block your appointment now, either as Teamviewer or Zoom meeting during 2019 or see diary link below for January 2020 UAE visit
  • Wish to make an appointment for January 2020? Why not, we can move it around to suit your new year’s plans. For now, ensure you have a slot by visiting My Online Diary – don’t worry you will receive regular reminders

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

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:

  • Does cross-border tax and exchange control only apply to certain groups or individuals;
  • Is it a requirement to give up your South African citizenship or to give up your South African passport when you immigrate;
  • Section 10(1)(o)(ii) of the Income Tax Act change – the new R1m exemption on foreign employment income cap explained and who it applies to;
  • How much of the foreign tax paid can be used as a credit against tax payable in South Africa;
  • Financial Emigration – myth or solution;
  • Who can use the 330-day rule;
  • Double Tax Treaties – the big solution;
  • Exit Tax payable on immigration and how much it is for different entities;
  • The UAE and its treaty in detail;
  • We answer 7 questions from our listeners
    1. What should financial advisors consider and what questions should they ask clients living and working abroad;
    2. Trustees of a trust who emigrate – what are the considerations;
    3. What should young professionals consider when moving abroad;
    4. What happens to tax already paid in the foreign country;
    5. What are the options for a person currently working in Zambia who is planning to retire in the next 3 years;
    6. What should a person do who works in Saudi Arabia, but their spouse is still living in South Africa;
    7. Foreign Investment Allowances;

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.

#taxmigration vs. #financialemigration

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 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?

signature address only 2018“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? 

img_4473An 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

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

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/
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.

cropped-header1.jpg

 

Cape Town

3 February 2019

 

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

How foreign employment income tax will impact South African expats

Do not believe the fear mongers suggesting you must emigrate formally to correct non-compliance.

Read more in The South Africa NewsPaper

Have questions? Make Contact with Hugo

https://taxmigration.com/contact/

The current hype into formal emigration being the absolute and final solution to escape the tax consequences of the new #Tax2020 rule has resulted in too many expats South Africans incorrectly opting for formal emigration.

Any expat that is concerned about the pending changes should immediately ask the following question: Did I file all my tax returns up to February 2018 and am I correctly registered as a provisional taxpayer? Being tax exempt does not exempt you from tax filing obligations.

Before one gets overly concerned about the March 2020 [#Tax2020] liability, you need to address the issue of outstanding and overdue tax returns. Anyone impacted by the new rules should have been tax filing with SARS.

If not tax filing for some years, one must ensure you have correctly tax emigrated and paid your exit levy on time. Doing a financial emigration in the current tax year, will not shield you against tax penalties and interest on the unpaid taxes.

Continue reading on https://www.thesouthafrican.com/south-african-expats-foreign-employment-income-tax/

Tax free salary does not equate to tax non-resident

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South Africans living in the UAE (Dubai) or Qatar (Doha) not paying South African tax on their foreign earned salary,  in most cases will remain tax resident in SA.

The 183/+60-day rule only speaks to the (partial) exemption of remuneration from employment. South Africans will continue to pay SA tax on worldwide income from all other income, including most retirement fund income albeit that the retirement fund is foreign based.  Immigrant South African may enjoy some limited tax exemption on foreign pension, yet the SA retirement funds will indeed pay SA taxable retirement benefits, albeit that contributions were made from tax exempt foreign employment income.

Immigrants must therefore distinguish between retirement funds accumulated before they arrive in SA, funds transferred from a foreign fund to a SA fund (QROPS to Living Annuity in SA) and funds contributed since they arrived in SA.

Because of the 2021 tax year changes (effective as of 1 March 2020 [#Tax2020], SA expats (being tax resident in SA, albeit that they are) residing and working in say UAE, Germany, USA and most other countries, will no longer enjoy full tax exemption on all their foreign sourced salary.

In fact, as of 1 March 2020, the taxpayer’s tax exemption will be capped at R1m per tax year.

This aligns the SA system with that of the USA yet we are not taxed based on nationality (as in the USA) but on tax residency status. SA tax residents can therefore tax emigrate (#taxmigration) unlike USA taxpayer that remain IRS tax filers on worldwide income, despite living in SA.

The USA exempts foreign earned income to a specific monetary value, which is adjusted upwards annually. Will SARS increase the R1m cap annually? Perhaps this where the Tax Petition Group need to focus on?

One is also extremely concerned about the misleading articles carried by news agencies! Even the News24 articles stating that “When one “emigrates financially”, however, they cease to be a South African tax resident and will not be liable to pay any South African tax on their worldwide income. ” is so far removed from the truth!

What is required is to tax emigrate and formal or financial emigration are not directly link and neither does the one guarantee the other.

Many expats now rush to tax emigrate from South Africa, all in an attempt to save the SA tax on the foreign income. In doing so the taxpayers may indeed trigger capital gains taxes on the tax exit placed on record, so late in the relocation process.

The unpaid exit charges may call for a VDP process! Need some guidance? Feel free to contact us

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24 Jan 2019

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