William Louw, Sable International SA tax director, says he’s seldom seen such a flood of South Africans wanting to to migrate.
“I’m booked solid for weeks,” he says. “The reasons people want to leave vary, but at the bottom of it all they want a Plan B. They see the country deteriorating, and believe it might get worse, and they are concerned about safety, education for their kids, and for some it is just that there are better opportunities abroad.”
Emigration is a big determination with severe monetary implications. Living abroad has a significant influence on how a lot tax you pay and to which nation that tax is paid. Your tax residency status determines how you’re taxed in a specific nation.
South Africans who’ve left the nation should now acquire a letter from the South African Revenue Service (Sars) to confirm their tax non-residency status, which is simply issued to these completely leaving the nation.
To apply for the letter, it’s essential to full the tax emigration course of by means of Sars.
Those dwelling abroad with out this letter may discover themselves obliged to report their world earnings yearly to Sars.
This additionally creates issues for these dwelling abroad and drawing dwelling annuities from a South African fund.
“A lot of people left in the 1990s and are well past retirement age, yet no longer have SA passports. The Sars eFiling system is linked to the ID document that Sars has on file, which may no longer be valid. We are having to assist several clients to regularise their status,” says Louw.
Understanding tax residency
Whether you reside in South Africa or abroad, you’ll be topic to earnings tax.
There are two considerations: the place do you pay taxes and the way do you keep away from paying multiple tax on the identical earnings?
If you reside in SA, you’ll almost certainly be thought of a resident right here for tax functions (although there are some uncommon exceptions). South African tax residents should pay Sars taxes on their earnings earned in South Africa alongside with international earnings, in situations the place that earnings exceeds a certain quantity.
Leaving South Africa doesn’t robotically classify you as a non-tax resident. If you’re a tax resident dwelling abroad, you may be taxed on international earnings that exceeds the R1.25 million threshold. You could also be affected by double taxation as properly, warns Louw.
However, the method of turning into a non-tax resident in South Africa will not be computerized. The solely approach to change your tax status is to formally bear the related authorized processes by means of Sars.
Understanding double taxation agreements
Tax returns are all the time to be filed within the nation the place you aren’t a tax resident first. It is feasible that, in sure situations, a specific quantity could also be taxed twice since tax methods differ from nation to nation. Double taxation can nevertheless be alleviated by means of varied Double Taxation Agreements (DTAs). By disclosing the tax which you’ll pay within the nation that you’re tax resident in, you’ll be able to often keep away from double taxation.
This is the place recommendation from an expert tax practitioner acquainted with worldwide tax is essential.
Benefits of ceasing your South African tax residency
The advantages of tax non-residency:
- You will solely be taxed on earnings sourced from South Africa (until the DTA overrides the conventional legal guidelines).
- Only mounted property positioned in South Africa and belongings of everlasting institutions will probably be topic to capital positive factors tax.
- International remittances are exempt from taxation. This is due to the tax being payable when the earnings is earned or the belongings offered, not when money strikes.
Importance of getting a Sars non-residency tax letter
If you’re tax resident in South Africa, you’re legally required to submit tax returns to Sars yearly. You should declare your worldwide earnings, each native and international, after which declare any exemptions or tax credit on international earnings. If you don’t formally word your self as a tax non-resident, Sars will robotically classify you as a tax resident in South Africa.
The non-residency tax letter is vital for 3 causes:
- The letter is the one approach to confirm that Sars has agreed that your tax status has modified.
- An emigration tax clearance is now required to get funds paid abroad if withdrawing out of your retirement funds prior to retirement.
- A non-residency tax letter is used when a non-tax resident wants to take an annuity or salaried earnings out of South Africa to switch abroad for the banks. In October 2021, laws modified for non-tax residents intending to declare a dwelling annuity whereas dwelling abroad. To switch funds from South Africa to an abroad checking account, an software for a very good standing tax clearance certificates should now be made. Previously, all you had to do was present that you just had financially emigrated and the fund may make an offshore fee. Now, the method of accessing your dwelling annuity offshore has grow to be extra sophisticated, significantly for aged non-tax residents and those that have been in another country for greater than 10 years. (See: How to access your SA living annuity offshore – an eFiling guide).
Louw notes that when you’re deemed a non-tax resident by Sars, the Reserve Bank now not permits you to use your Single Discretionary Allowance to switch funds out of SA. You have to show you may have a non-residence letter from Sars or use your Foreign Investment Allowance (FIA).
“It is important to take the necessary steps, knowing that Sars does not automatically issue the letter of tax non-residency (as they promised they would),” says Louw.
“Know your tax status and act accordingly so that you are not negatively affected.”
Sable International offers complete tax providers and recommendation for South Africans at house and abroad and anybody with South African earnings. It may be reached at taxsa@sableinternational.com or by cellphone at +27 (0) 21 657 1517.
Brought to you by Sable International.
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