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When push comes to shove – pension tax exemption for South Africans abroad

By September 22, 2015October 6th, 2023Tax services and consulting

When push comes to shove – pension tax exemption for South Africans abroad

September 22, 2015

Many South Africans who have relocated abroad test the international financial waters before making any unnecessary decisions about their money. Others simply cannot contemplate another big change – for no matter how you consider finances; too many uncertainties abound. The slightest wrong decision could have a dire impact on your nest egg, and if you’ve emigrated from South Africa you’re dealing with enough uncertainty.

At least, back home, you are sure of death, taxes, and load shedding. Well, we’ll give you death and load shedding. But when it comes to taxes, unfortunately, you can no longer be so sure. In fact, it may just be the best time to tackle the tax on your pension fund – lest you lose out. And we’re not talking about petty cash here – no, you could stand to lose thousands of Rand on your pension as a result of tax. And unfortunately this loss needs no action or decision on your part – it simply requires your inaction.

The tax man could come knocking twice

Previously South African expats were taxed on their pension by SARS and received a tax credit in their new country of residence. This has now changed in some countries and is busy changing in others – the result means you could be taxed twice – once in South Africa and once by the collector of revenue in the country where you now live.

This approach has already been implemented in New Zealand, the United Kingdom and Australia.

This is bad news, to say the least! But the situation is certainly not beyond your control. By going through a process with SARS you can be exempt from tax in South Africa. Not only will you avoid paying tax twice but because of the way tax systems work in many of the countries to which South Africans have emigrated, you may end up paying less tax.

Tax residency

With travelling becoming ever easier, faster and increasingly affordable – more and more retired parents are spending extended periods of time with their children, in their new countries. This may offer them the opportunity to pay less tax on their South African pension – if they stay with you for a minimum of six months per year, they could meet the local tax residency criteria, declare their annuity income there and apply for exemption in South Africa. The benefit of this is that in many countries higher tax rates kick in at higher thresholds than South Africa. For example you could save up to R38 314 on a R500 000, in the UK, and up to R42,078 on a R1 000 000 pension, in Australia.

How to save on your pension tax

In order to enjoy these savings, you must be registered for tax in a country other than South Africaand complete the exemption process with SARS each year.

To find out how this opportunity affects you, let the tax ream at contact you. Then sit back and relax while we do the admin for you to maximise your pension income.

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