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D-day for South African Tax Resident Expatriate Taxpayers Earning Foreign Remuneration!
Come listen to the experts!
Presenter : Hugo van Zyl
Date: 26th April
Time : 14h00 – 16h30
Venue : Al Ghazal golf club, Abu Dhabi (next to airport)
Cost : AED 100 (to cover costs)
28 April – 1 May 1-on-1 Meetings in Dubai
D-day for South African Tax Resident Expatriate Taxpayers Earning Foreign Remuneration!
Effective 1 March 2020 South African tax residents living abroad will no longer be automatically exempt from tax in South Africa on their foreign employment income.
Time out of South Africa is not an automatic guarantee that you are no longer a South African resident taxpayer! Double Taxation Treaties may also not work to your benefit!
The removal of the exemption has resulted in considerable confusion with many advisors stating that the only way to sever the tax link to South Africa is to formally (financially) emigrate. This is not always the solution as it creates problems of its own.
Know any #Saffas pilot or crew “working on board” for 🇦🇪 Dubai / UAE employer? There is indeed special rules that may shield expat pilots in the UAE against the impact against #Tax2020. It may indeed be possible to be totally tax exempt on all income from employment provided the employer is not a South Africa company. Need to know more? Come meet me in Dubai 26 April – 2 May 2019.
Leading South African expert and internationally renowned speaker Hugo van Zyl will unpack all the complexities surrounding this change to the Income Tax Act as well as explain how the Double Taxation Treaty between South Africa and UAE may, or may not, apply to exempt you from tax in South Africa. He will answer questions such as who is responsible for the payment of the income tax, when is the tax due, can a credit be claimed for tax paid in the UAE, will certain benefits received in the UAE be classified as fringe benefits which are subject to tax in SA, how does the R1 million exemption for foreign employment income work?
He will also deal extensively with the difference between tax and financial emigration, and the unintended consequence and actual cash cost of each option.
South Africans, accountants, attorneys, financial advisors, payroll administrators, management companies in fact anyone who typically has South African clients should definitely NOT miss this presentation. In the past it was easy, provided that the South African resident stayed out of the country for 183 days with a continuous period of 60 days then they knew that they were exempt from tax. That will all changed and if you get this wrong then you or your client could end up under-declaring for tax resulting in penalties and interest!
We have some time before the promulgated law becomes effective, but its indeed real. It is promulgated and time to act is running out
Remember, this tax is a voluntary tax! You can either leave your status quo as is which may well result in you paying tax in SA or you can take active steps to ensure that you are not liable. The first step is education and this seminar will assist you to understand what option is best suited for you to ensure that you do not have to unnecessarily pay income tax in South Africa.
Presenter : Hugo van
Hugo van Zyl is a South African Chartered Accountant and a registered Master Tax Practitioner with the South African Institute of Tax Practitioners. With more than 30 years’ experience in all matters relating to cross-border expatriate tax, cross-border trade, financial emigration, income tax and exchange controls he is considered as one of, if not the, leading experts on the new tax rules being implemented in 2020. He is a highly regarded speaker who has lectured both locally and internationally and has represented SARS, the SA Institute of Tax Professionals, the SA Institute of Chartered Accountants and STEP at various levels
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
“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.
13 October 2008
Formal Emigration / Excon Exit Check-list
Hugo van Zyl, working in close corporation with other intermediaries, smaller and medium sized audit and or law firms, will gladly assist in analysing the feasibility of a formal emigration. Once the expat or emigrant to be is ready, we will assist with all formalities and the submission of the required documents at either or both SA Reserve Bank (SARB) and the South African Revenue Services (SARS).
Formal Emigration is indeed a SARB and SARS event and there is no reason to give up your SA citizenship, in fact we encourage all South African passport holders to protect their current passport. The SARB formal emigration is however subject to clients having the necessary immigration status in their new home country. Although we provide general guidance, based on SARB or Exchange Control (Excon) guidelines however all clients will have to appoint their own immigration agent or lawyer in their chosen home country.
Tax emigration is often partly completed prior to the financial emigration from our Excon system; however clients should also ensure they have appointed a tax accountant in their new home country to ensure the transfer of asset values is correctly processed. Certain immigration jurisdictions allow immigrants to exit the SA system and gradually enter the new tax system. The most well known is probably England and it’s NDR system yet more recently New Zealand and Australia announced certain tax deferment options. Hugo has a working knowledge of these rules however specialist advice should be obtained locally in the immigrant’s new home country.
Before we can assist, we require the following information:
1. Initial Analysis – minimum documents required
1.1 FIC Act documentation (www.fic.gov.za); i.e.
1.1.1 SA ID document – certified
1.1.2 SA Passport – certified
1.1.3 SA utility bill reflecting residential address or acceptable alternative
1.1.4 SA Tax number and copy of last tax return filed alternatively a newly completed SARS IT77 form; and
1.2 An acceptance of our standard terms of business, based on the SAICA proposed mandate letter – refer to our webpage;
1.3 SARS limited Power of Attorney – as per SARS web page
1.4 Tax reference number in new country
1.5 New Passport, work permit, permanent residence permit or green card (USA).
1.6 Latest balance sheet as filed with either SARS and or SA bankers. For a family unit we require a separate balance sheet per person;
1.7 Summary of pension funds, retirement annuities and life cover as separate summaries;
1.8 Short summary on the family’s background i.e. source of funds, family structure and an indication of the assets to be externalised vs. assets to be left in SA as blocked assets?
2. Our Initial Analysis
Based on the above check-list and any other information Hugo may require;
2.1 An initial analysis is provided to the client or the referral firm or intermediary; where after
2.2 The client must sign and confirm our analysis as true and correct as this document will be relied upon by the local advisors (bankers, insurance brokers and auditors) as well as the new advisers in the new home country.
3. Client Elects To Proceed / Place Application On Hold
Consider alternative or more appropriate options such as FIA (R2m per person) or FDI where the emigrant is required to expand his SA business formally into new country but do note neither the FDI nor the FIA are emigration options!
3.1 Update the tax status of the client, his spouse and that of his children to be included on the family emigration form. We normally rely heavily on the client’s existing relationship as they will best know the answers to all questions following the
3.2 Tax clearance application; which entails the following information / decisions:
3.2.1 Market value analysis of life cover and retirement funding;
3.2.2 Name and address of local SA agent taking responsibility for the filing and payment of future taxes;
3.2.3 Updated market value balance sheets per taxpayer as well as consolidated family unit balance sheet; where after
3.3 A client meeting or telecon (using Skype) can be arranged to ensure the client has a correct understanding of the process, the implication and the cost of such an application which includes:
3.3.1 Our fees and the fees of other family advisors;
3.3.2 CGT on the sale or deemed sale of SA assets;
3.3.3 The fees to be charged by the chosen authorised dealer i.e. obtain details of chosen bankers (authorised dealer where client and or spouse have account at various different banks) where after contact should be made with the non-resident or cross border branch of the elected authorised dealer.
3.3.4 Excon Exit Levy – the rate, how it is calculated and when it is payable;
3.3.5 Cost of a failed emigration where clients return to SA within 5 years and there after.
3.4 Present at the meeting, be telecon or through file notes as the clients, their tax advisor and accountant if not same and any other advisors such as corporate trustee
4. The SARB Emigration Application M.P. 336(b)
The following information and documentation are to be presented to Excon through the authorised dealer:
4.1 Documentary proof of permission to live in the new country, i.e. certificate of citizenship, proof of residency etc. or new passport;
4.2 Copies of tax advice taken in the country that they are emigrating to. 5
4.3 Proof of any remaining Foreign Investment allowance available for the family.
4.4 New consolidated balance sheet of the family unit using the heading as reflected on the said MP336(b); and client to indicate
4.4.1 Assets to be transferred within the next 3-5 years;
4.4.2 Assets to be retained in SA as so called blocked assets. Each class of asset has different requirements before they are effectively placed under control of the authorised dealer.
4.5 Where there was any donations made or received within the last 3 years:
4.6 Where there is any trust obtain the following:
4.6.1 Trust deed;
4.6.2 Last 3 years annual financial statements
4.6.3 List of any capital distributions (awards or donations) from a trust in previous 3 years
4.6.4 History on the funding and formation of the trusts. The client should be made aware of the fact that there is an Excon differentiation between an inter vivos and mortis cause (or will) trust; and
4.6.5 Undertaking to ensure trust’s board of trustees are mainly or in the majority, resident in SA
4.6.6 Completed forms M.P.1330(a) and M.P.1331 iro income remittances post emigration from the trust based on last Audited financials or Pro-forma for the Financial year end. No post emigration income can flow until submitted and approved – yet no capital may leave without the 10% Excon exit levy i.e. the trusts’ annual accounts must be filed regularly post emigration
4.7 Obtain full details of Insurance policies, Living and Retirement Annuities (including history i.e. age and amounts contributed), Pension Funds ; which sahell include
4.7.1 Contact details of FSB approved broker;
4.7.2 Original policy documents which has submitted to the Authorised Dealer as so called blocked assets although annuity and pension may normally be remittable once emigration is completed;
4.8 Name and address of share dealer / stock broker / wealth manager iro of the all the family units as well as the associated trusts; and where client so wish
4.8.1 Unlisted shares retained: Obtain share certificates, loan certificates and last 5 years annual financial statements should be filed with the Authorised dealer. Client should be made to understand borrowing limitation may now apply;
4.8.2 Listed shares: Letter of undertaking from the broker / wealth manager
4.9 List of all credit cards to be cancelled or retained as debit cards as well as all other bank accounts to be consolidated and closed in favour of the single blocked account operated by the non-resident centre / cross border branch of the chosen authorised dealer;
4.10 List of all known liabilities which includes:
4.10.1 Immediately due and payable income tax and removal costs;
4.10.2 Post emigration expenses of liabilities such as cost to maintain family’s holiday home, cell phones etc. As guideline we provide the following amounts which may be taken from blocked funds: R75 000 living allowance for periods spent in SA, R100 000 annual donations, R100 000 property maintenance, all medical expenses but note that the post emigration tax liability must be funded from post emigration income which is normally remittable funds.
4.11 Detailed information on all fixed property, share block and time share assets:
4.11.1 Require a reasonable valuation of property at date of departure, although there is no SA CGT until the immovable property is sold;
4.11.2 Valuation used for both the M.P. 336(b) and for CGT in new country of residence;
4.11.3 Warn client on the new CGT withholding tax rules now applicable to non-resident taxpayers; and finally
4.11.4 Obtain original Title deeds or where necessary a certificate and letter of undertaking from the mortgage holder
4.12 Debtors and other amounts collectable i.e. funds held in trust by transferring attorney:
4.12.1 Need certificate of balance in required format from each debtor (including loans receivable); and
4.12.2 Letter of undertaking re payment into blocked accounts
4.13 Other assets – Timeshare, motor vehicles, furniture, personal effects etc not exported.
4.13.1 Once again valuation and Certificate of Title where applicable; together with
4.13.2 Letter of undertaking in prescribed format;
But excludes any of the following, all of which can leave without a 10^% Excon Levy up to a maximum of R1m (which is subject to review):
4.13.3 Chattels, yachts; personal effects and any other assets to be sent out on form NEP (No Export Proceeds Form); therefore
4.13.4 Separate NEP for each class of assets i.e. furniture going by ship vs. coins and jewellery being carried out as hand luggage. NEP must be pre-stamped by Authorised Dealers
All current and future liabilities need to be accounted for, including CGT on assets disposed of or retained but deemed as disposed, professional fees and removal / relocation costs. As these liabilities will be settled from blocked funds certificate of balance may be required / loan certificate where it is an intra-group loan to trust or private company