If you are thinking about your upcoming relocation, now is the time to take a closer look at the tax and financial implications linked to emigrating from South Africa. On the very top of the list of things to consider when emigrating from South Africa should undoubtedly be timing. The phrase “timing is everything” has never been more meaningful than when applied to your exit date from the country. If you time your exit well, you will benefit from it. The reason for this is that the tax implications can vary, depending on what time of year you are emigrating from South Africa. If you leave at the wrong time, you could find yourself being taxed heavily. If you are clever about it and leave at the right time, you could receive some much needed financial relief. Let’s face it; emigrating is not a cheap endeavour!
Timing is everything
Your status as a tax resident of South Africa plays a role too
Let’s talk about how tax affects someone exiting the country…One of the things to do before you emigrate from South Africa is to take a look at your tax and how you plain to manage it. If you want to avoid paying heavy taxes in both countries, it is important to have a plan. Emigrating offers you the opportunity to ensure that SARS no longer sees you as a tax resident of the country, which means that you won’t have to pay tax in South Africa or submit a return. This is what tax emigration is all about. There’s a catch though…this is only the case if you aren’t earning a form of income in South Africa. If you are, you won’t be able to fully tax emigrate from the country.
How much time you work outside of South Africa has an impact
When you change your tax status in South Africa, you are processing your tax emigration. How much time you spend out of the country each year can also have a bearing on your tax. South African taxes are based on the fact that you will spend the majority of the year in the country, earning a set income each month. Of course, you are taxed on your income for each month that you are working in the country. When the year draws to a close, you will be refunded for any tax that you were overcharged. If you were out of the country working or unemployed for some months, you will receive a refund.
This is where your timing can become beneficial to you. If you emigrate early on in the tax year and only have a salary for a few of those months, you will be provided with a larger refund when the financial year comes to an end. If you decide to process your relocation later on in the tax year, your refund for the months you weren’t working will be quite minimal.
The timing of selling your property is important
Another one of the things to consider when emigrating from South Africa is the selling of your property. A lot of people don’t have the faintest idea about CGT (Capital Gains Tax) when planning their emigration. What you need to know is that in SA, property is subject to Capital Gains Tax if you sell it. This comes into effect even if you aren’t a tax resident in the country at the time.
You might not think so, but when it comes to property, timing is extremely important because if you sell your property the same year that you emigrate, you may end up paying CGT along with other assets at the very same time. And that can be a hefty fee. You can work around the issue by selling your home the year before you leave the country or the year after you leave. The tax on the profit of the sale will then apply to the year prior or the year after and it provides a little bit of financial relief when you are emigrating.
Of course, if you aren’t worried about finances, working around tax costs may not be on the forefront of your mind. The reality however is that most people emigrating from South Africa are strapped for cash and need to find financial relief wherever they can. By timing your relocation carefully, you can save yourself some of the financial exhaustion many new expats experience. If you are able to do this, your new start will be easier and considerably more enjoyable.
FinGlobal helps SA expats make sense of their emigration finance
There are undoubtedly many things to consider when emigrating from South Africa. Financial aspects are a large part of the process. If you want to save yourself paying out huge lump sums that might actually make the relocation impossible for you, you need to plan carefully, time things wisely, and seek out the advice of professionals in the industry. At FinGlobal we are dedicated to providing premier advice and guidance to South African expats who are located all over the world. We can assist you with your tax and financial emigration as well as provide you with the know-how to get your retirement annuity funds paid out. With the help of our team, your financial and tax emigration (along with other financial aspects of emigrating) can be handled smoothly and professionally. For further assistance, all you need to do is contact us.