SARS World-Wide Tax

There are many South Africans working or living abroad, only returning to South Africa for holidays or to visit family. This reflects a modern way of life, where the South African expertise and work ethic are sought after by international employers; yet South Africa remains the home.

This has all changed with the shock announcement by National Treasury and SARS, that the tax exemption on South African expatriates is set to change.

SARS concerned about expatriate non-compliance
The stated views of respectively National Treasury and SARS, in Parliament, were very clear based on researched numbers of expatriate tax submissions. The numbers show that many South African passport holders and permanent residents have simply left, without formalising their affairs with SARS or the South African Reserve Bank.

This has prompted not only a law change, which should be promulgated in January 2018, but also a stated SARS tax audit focus on those expatriates who have left and simply decided to ignore their taxes. Some have not considered it even necessary to submit tax returns in South Africa, others submitted zero tax returns to SARS, some even indicated that they are unemployed on their tax returns; whilst earning expatriate salaries.

Targeting starting with tax return changes
Whilst many expatriates hope, incorrectly, that SARS will drag their feet, the 2016/17 South African tax return already included targeted questions dealing with expatriate tax status. The questions may appear innocent enough, but we have seen this trigger an automatic verification or audit process. Where the question is marked false, this is a criminal offense, thus creating an even more serious problem.

These questions are still limited now, but they will no doubt be expanded in future tax filings, as correct profiling of taxpayers often directly informs SARS audit decision.

International banking reported to SARS from 2018 onwards
SARS has committed itself to complete its implementation of the Organisation for Economic Cooperation and Development’s (OECD) Common Reporting Standard (CRS) by end of December 2017.

This means there will no longer be offshore hidden money, as the world has followed the United States’ lead in forcing disclosure by financial institutions of any account owned or otherwise connected to South African residents or citizens.

The solution
Financial emigration is a formal process with the South African Reserve Bank (SARB) to change your tax status from ‘resident’ to ‘non-resident’ for exchange control purposes.

“This is a SARB legal requirement as well as a South African Revenue Service (SARS) requirement to confirm non-residency”, as explained by Jerry Botha who represented the South Africa Expatriate Tax Group in Parliament during September 2017 on this law change.

The reason most people financially emigrate is because it gives legal certainty on their non-residency status for tax and exchange control purposes, as well as holding certain financial planning benefits such as the one of the few ways of cashing out your retirement annuity.

When one emigrates financially they cease to be a South African tax resident and will not be liable to pay any South African tax on their worldwide income. They will, however, be required to declare any South African sourced income that may be taxable, such as rental income. Also, there is a deemed disposal for capital gains tax purpose on certain property when you emigrate, but after that you are exempt from capital gains tax and estate duty in South Africa. This deemed disposal for capital gains tax is very often also misunderstood, as this only applies to certain assets and not to fixed property.

You do not have to give up passport or sell your assets.

The financial emigration
process has no bearing on your citizenship, passport, or ability to own property or assets in South Africa. This misconception appears to be caused by either misunderstanding of the process, or by unscrupulous advisors wanting to punt services ranging from selling foreign residency visas, cashing out of policies or making money on forex services.

A professional services firm of attorneys, CA(SA)’s, Master Tax Practitioners®, Certified Financial Planners® and with own FSB license and emigration attorneys.

claudia@financialemigration.co.za
www.financialemigration.co.za