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.
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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
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:
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