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Unless you specifically choose otherwise, marriages in South Africa are ‘in community of property’ by default. Not only does this mean you enter the marriage as equals to jointly share all property and money 50/50 but being married in community of property also has practical filing implications for tax purposes, especially as South African expats. Read on to ensure you’re clued up on what tax planning in South Africa will look like once you’re living abroad, in order to avoid the shock of administrative penalties from a South African Revenue Service that is becoming increasingly efficient in collecting expat tax. 

Tax planning South Africa

What should expats know about tax planning in South Africa

By now, most expats are familiar with changes made to foreign income tax exemption laws. Previously, South Africans could claim tax exemption on their foreign earnings as a whole where they met certain time-out-of-country requirements. Currently, South African tax residents rendering employment services abroad can still access this exemption by meeting the time-out-of-country requirements, but only the first R1.25million earned can be tax-exempt. Any foreign income over and above that R1.25 million threshold is now taxed in South Africa according to an individual personal margin based on the relevant tax tables for the tax year under assessment. The following income will qualify for tax relief in terms of the Income Tax Act:

  • Salary; including taxable benefits; leave pay and wages
  • Overtime pay; bonuses; gratuities; commissions and fees
  • Emolument and allowances, including travel allowances, advances and reimbursements
  • Amounts received from broad-based employee share plans, or
  • Money received in respect of a share vesting.

Why is this important to know? Because as a South African living abroad, you’ll be expected to pay tax as long as you’re a tax resident unless you cease your tax residency at SARS.

How does expat tax affect couples married in community of property?

If you’re a married couple living and working abroad, you and your spouse could be jointly liable to pay expat tax back home in South Africa. To add insult to injury, you could even find yourself a victim of double taxation – not because you’re a couple –  but because there is no Double Taxation Agreement between SA and the country in which you are earning a foreign income. As a result, the first R1.25 million you each earn will be exempt from tax in South Africa, but any money above that is taxable by both authorities until there is a  clear rule in place that gives either country the right to tax you first.

Tax planning for couples: what to be aware of

  1. Find out if you and your spouse are liable to pay expat tax by determining whether you’re considered a tax resident by the South African Revenue Service.
  2. Find out whether or not there is a Double Taxation Agreement in play if you are a tax resident.
  • Remember that if you’re considered a South African tax resident you’re expected to both file an income tax return for each assessment year.
  • The foreign income tax exemption does not apply automatically, you have to request it and prove that you meet the requirements for the exemption.
  • In order to avoid paying tax in South Africa entirely,  it’s worthwhile for you and your spouse to sit down and discuss the timelines and tax planning involved in ceasing tax residency in South Africa.
  • Bear in mind that you’ll have to deal with deemed Capital Gains Tax on your tax emigration which will be split 50-50 regardless of whether all assets were in one spouse’s name or not.
  • Both spouses will need to file a tax return that shows they have jointly met their Capital Gains Tax obligations, and the same applies for rental and interest income.

FinGlobal: South African cross-border tax experts

If you’re concerned about the intricacies of cross-border tax planning for couples married in community of property, we’re ready to help! With all the right tax expertise in-house, we’re equipped to help you and your spouse get your tax affairs straightened out. We can advise you objectively on tax emigration, and help you put together a plan of action to address your tax objectives that will see you through until you’re in a position to complete tax emigration, if you so choose.

So if you’re ready to take the next step in planning your financial future, we’re ready to support you with everything tax-related –  from tax advice to tax refunds,  tax clearance and tax emigration – from start to finish.

To take advantage of our free 100% confidential SARS assessment, leave us your contact details and we’ll be in touch.