Tax when you emigrate, work outside SA: tips, traps, expert advice


If you are planning to leave South Africa or have already left South Africa, there are key financial factors to consider in order to minimize tax obligations. William Louw, South African Tax Director at Emigration Specialist Sable International talks to BizNews, about how to navigate South Africa’s delicate tax system. – Jackie Cameron

William Louw on the current tax scenarios he is currently seeing:

One of the common things I see is that a lot of South Africans have left without informing SARS of their changing tax status and that can have a ripple effect. We’re also finding that many more people are planning the tax exit, which means they can then plan what taxes to pay and make sure they have the cash they need. There are also quite a few South Africans coming back, who then have to decide what to do and how to value their assets coming back into the South African tax net.

On problems related to tax obligations when working abroad:

What you need to understand is that while you are a South African tax resident, you are paying taxes on your worldwide income. You are liable for capital gains tax on your worldwide assets. As a non-tax resident in South Africa, you are only liable for taxes on your income of South African origin and your assets of South African origin. There is a twofold change here – one being income streams and the other being capital assets subject to tax in South Africa.

Because SARS loses its tax rights on your assets the moment you change your tax status, SARS considers that you are selling your global assets from your own local to your foreign self, triggering capital gains before you leave. the South African tax net. This is usually the biggest risk for people who don’t plan properly.

Certain assets are specifically excluded because they are still considered a South African source or do not trigger a tax event. South African property, because it cannot leave South Africa, is still subject to South African tax. As such, it does not trigger any tax when you change your tax status. When you sell it at the end, then you will pay your taxes at that time.

When moving offshore:

You should get tax advice from both countries, to make sure you understand what happens when you enter tax jurisdiction and what happens when you exit tax jurisdiction. One of the key factors is that the South African capital gains tax works slightly differently than many other countries. In other countries, this is often a fixed rate that you pay based on the capital gain. However, in South Africa what happens is that part of the capital gain is added to your normal taxable income in that tax year.

If you don’t plan properly and leave towards the end of the South African tax year, then you will add your capital gains tax on top of any income you earned for the year. full – which could represent 11 months of salary. Then you pay a higher tax rate because in South Africa you go from 18% to a maximum of 45%. If you go at the start of a South African tax year, you usually have very little South African income, which means that when you add capital gains tax to that, you find that the Tax is much more acceptable and easier to manage, which means you don’t have as much of a cash flow problem.

You should also be aware that if you have to pay tax on the change in your tax status, that tax is often due before you actually change your tax status – which is a tax burden that you should plan for and be prepared to. pay immediately. . If you don’t pay it and then file your income tax return, SARS is allowed to charge penalties for late submission and late payment of taxes – which you don’t want to do.

When emigrating to retirement:

It can be just as complex. Another thing that needs to be tossed into the mix for someone like that is that they may have retirement pensions or the like in South Africa – which they have already converted into a living annuity. Once it is in a living annuity it should always be paid like that from South Africa. These living annuities are controlled, in large part, by a double taxation agreement – how countries can tax them. For the UK, if you receive an annuity from a South African source, you must exempt it from South African tax, as you are only supposed to pay tax in the UK.

Then in South Africa you have to apply for an exemption every year with SARS and you have to file a tax return every year with SARS. It takes extra work, even if you’ve been away from South Africa for 10 or 15 years – you could continue to do so for the rest of your life. If you have significant savings and planning like this, we recommend that you speak to a wealth management team like ours so they can plan what to do with it. One of the main things our wealth team could help you with is trying to convert your retirement annuity to a foreign currency base so that it is easier to monitor the security of your capital base rather than the volatility of the South African rand.

On the complicated scenarios facing South Africans:

One of the most complicated scenarios where the family unit begins to move. Often in South Africa it is difficult for a white man to find work, especially when he is older. The family doesn’t necessarily want to leave the country, which means if he goes abroad to earn an income his tax status might not have changed – even if he can spend a week or two in South Africa – because his family is still there.

He returns the funds, making it difficult for tax residency – and he’s likely to be a South African tax resident. If so, then he is sitting with a potential problem. The other problem that is often a problem for South Africans is when they are working on boats in the Mediterranean or the Caribbean, and they are on a private charter which is not rented by the owners. to third parties. Then that income stream is exempt from South Africa and everything is pulled into the South African tax net. Many of these people don’t like to hear this news.

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* This podcast is proudly brought to you by Sable International.

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