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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
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.
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My other blog –cross border tax
Having read the very informative article one is left wanting some more facts on the deemed C G T (capital gains tax) on the assets not sold, yet left behind. The one nice thing as that CGT on immovable property is always payable on actual sale only!
No need to bond the immovable property to pay its taxes, but you may need to cash n a few shares or mutual funds!
More information on request
It is election time in South Africa and suddenly there is an increase in the requests for formal Excon Emigrations.
April 2009 Tax Diary
1. Turnover Tax for Small Business
Applicable to all small businesses with a turnover R1m and less (see full guide on TO Tax)