International work opportunities have increased with the post-Covid economic resurgence, and many skilled South Africans have become sought after abroad. If you’re planning to leave the country, it’s crucial that you know the ins and outs of tax emigration and how to proceed.
Tax emigration from South Africa includes informing the South African Revenue Service (SARS) that your tax status has changed to determine how you should or shouldn’t be taxed in South Africa. SARS uses different criteria for determining your tax residency status.
Changing your tax residency status is an admin intensive and laborious process. You have to deal with several different parties. There are also various complexities you need to be aware of in advance when making your decision.
Because of this, many people choose to engage professional services to take care of the process. However, it’s easy to be misinformed and misled by tax advisors promoting their own agenda. If you’re in the process of emigrating, vigilance is vital when seeking counsel from tax consultants. Here are some common myths and what to look out for when choosing a tax emigration partner.
Tax Emigration from South Africa
1. You don’t have to declare or submit anything to SARS because you live abroad
This is a common misconception that uninformed and unethical advisors or consultants sell to clients. They propagate the idea that SARS will forget about ex-pats or forgive transgressions. However, the responsibility falls on you to inform SARS once your tax status changes.
If you don’t notify SARS of the change, they have the right to assume you’re a South African tax resident. This entitles them to tax you and raise assessments when they shouldn’t. They can also levy penalties that go up to 200% for non-payment and non-declaration.
Until you change your tax status, you’ll get taxed on your worldwide income like usual.
2. SARS can’t find you in another country
South Africa is one of the early adopters of the Common Reporting Standards (CRS), which requires that information is collected by financial institutions worldwide for reporting to tax authorities. Tax authorities exchange such information to ensure everyone pays their taxes.
Under the South African Tax Administration Act, SARS can exchange taxpayer information with foreign governments under an international tax agreement. This includes exchanging information on request (EOIR), spontaneous exchange, or automatic exchange of information (AEOI).
You’ll be seen as non-compliant and face harsh consequences if you don’t submit tax returns on your foreign income. You can also face tax evasion charges if you fill out false tax returns that don’t correlate with the information received by SARS.
3. You qualify for double tax agreement (DTA) reliefs automatically
DTAs are agreed-on legislation between South Africa and other countries to ensure you’re not unfairly taxed in South Africa and the corresponding country. The DTA helps alleviate the possibility of double taxation and determines where you must pay taxes on income received.
In almost everything that involves taxation, you’ll rarely qualify for anything by default. You have to follow a submission process. Assuming you’re automatically tax-exempt is a common misconception among South African ex-pats.
Various factors have to be considered and objectively proven. You’ll still be required by law to file a tax return and ‘claim’ the exemption under the DTA treaty.
4. You’ll be a non-resident if you stay outside SA long enough
Your tax residency status will only change once you’ve made a declaration to SARS and received approval. SARS must be informed when an individual ceases to be a tax resident, and there are two channels you can use to make such a declaration.
If you’ve ceased to be a tax resident during the current assessment year, you can inform SARS through the wizard on the income tax return (ITR12). The date on which you ceased to be a tax resident must be provided.
You can also inform SARS by completing a Declaration of Cease to be a Tax Resident form and submitting it with the relevant supporting documentation.
5. A DTA can give you permanent non-residency
One common misconception on double tax agreements is that you’ll get permanent non-residency and be absolved from filing returns by a DTA. However, the DTA doesn’t permanently alter your tax residence in any way.
DTA reliefs are exemptions that have to be claimed, and you have to file your returns to claim the relevant relief. This provides SARS with the opportunity of verifying if you satisfy the requirements of the exemption.
Such determination of TA applicability is done annually, and there’s no guarantee that you’ll qualify.
6. You need to financially emigrate to escape ‘expat tax.’
Many advisors falsely tell South African tax residents working abroad to financially emigrate to escape paying taxes. However, acquiring approval from the South African Reserve Bank to emigrate from a financial perspective is not connected to your tax residence.
Your tax residence will not be automatically broken when you financially emigrate. The deciding factor remains whether or not you’ve broken your ordinary residence. Financial emigration is only one factor that’s considered in determining whether or not you’ve broken tax residence.
You’ll not lose your SA citizenship by financially emigrating, and you can even financially emigrate without being a citizen or permanent resident of another country. The first step should be assessing your tax status before rushing to financially emigrate.
Consult professional and licensed service providers only
It’s easy to fall prey to quick tax advice peddled by ‘experts’ on social media and the internet. Such pundits often have contradicting views, mainly because tax emigration is a complex and multi-dimensional taxation area.
Never forget about the tax man in South Africa when considering your foreign earned income. Ensure you comply with the tax jurisdictions of the new country and the SA one as well.
It’s also imperative that you consult only licensed and professional tax emigration providers with robust legal components. This will ensure you don’t become liable to a provider’s negligence or fall prey to misleading advice.
Partner with FinGlobal when emigrating from South Africa
Choosing the right emigration partner when leaving the country is important. FinGlobal is a team with ten years of experience and a plethora of happy customers ready to share their positive reviews. In addition to assisting you with your tax and financial emigration from the country, we can assist you with FOREX as well as gaining access to your retirement annuity when abroad.
For more information and advice, simply get in touch with us. You can give us a call on +27 28 312 2764 or email us at firstname.lastname@example.org today.