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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.
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
“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
Looking for the last blog? Follow this link
Blog updated 3 February 2019
Expats living outside SA must first answer the following questions before they agree to emigrate financially:
And now the questions we will be asking:
Once you have considered all off the above, feel free to be in contact.
3 February 2019
#financialemigration #Saffas #Expar #Taxmigration #Wegkaner #taxemigration #formalemigration
Read more in The South Africa NewsPaper
Have questions? Make Contact with Hugo
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.
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
You need more information? Welcome to contact writer on
24 Jan 2019
As Americans recover from their 4th of July parties, it is indeed time to consider the tax cost and consequence for aliens investing with Uncle Sam
Yes, South Africans are aliens. President Trump may or may not have referred to people from South Africa as living in a s’hole country, who am I to say!
The IRS and USA tax laws most certainly labels us South Africans without an USA passport or green card as non-resident aliens.
We may not be from Mars nor Jupiter yet we are, upon death to pay FET (Federal Estate Tax) on our USA situs assets.
FET’s maximum rate is 40% and there is no spousal roll over. The exempt amount is a mere $60 000. No further SA estate duty is payable on the said USA assets, as there is a treaty in place
No spousal roll-over you ask? Yes, no roll over and the take home is that USA stock and cash held by you USA stock broker, should NOT be bequeathed to your spouse!
No, not to the offshore trust either as your wife will be taxed, upon her death assuming she is the surviving spouse, on the USA situs assets held within the offshore trust.
Who then, should be nominated as the named legatee in your will, as the person to inherit eBay, Facebook and all other USA equities?
Indeed an interesting question and one best addressed during a one-on-one meeting, with your SA accountant, duly present.
Need an appointment? Feel free to make contact on
First publisched by: http://www.bcbadvisory.com/formal-emigration-not-advisable-for-all/
“BRS: AEOI” means Business Requirement Specification: Automatic Exchange of Information
There is so many new tax acronyms, one can’t be blamed for not always knowing the full phrase behind the tax acronym.
To guide you, we add a few new once, all from an SA perspective yet they are all well-known international acronyms or abbreviations.
Here they are, but it is not an exhaustive list:
OK, you still lost? Need some more info on all the buzz words and your compliance risk and obligation? Feel free to ask the questions:
Ex-pat Pensioners residing abroad (not having formally emigrated) can now extract their monthly pension and retirement annuity income from South Africa (SA) without the need of a tax clearance certificate, despite living abroad as so called temporary non-residents.
UK resident ex-pat pensioners must take note of their NDR status and the tax consequences of remitting SA pension to the UK.
UK, USA, Australia and New Zealand ex pat pensioners may need to avail to treaty benefits to extract their pensions tax free from SA.
Should you need help complete the section below and we will be in contact.
Note the comment on PR status for South African born nationals. Walvis Bay was South Africa for a long while!
Hugo van Zyl
Sent from my iPad