There is a lot of supporting documentation required by the South African Revenue Service (SARS) when undertaking the process of tax emigration to have your status changed for tax purposes from resident to non-resident. One of the requirements is a statement of your individual assets and liabilities as at the date on which you left (or are planning on leaving) South Africa. This is required because emigration is a Capital Gains Tax trigger event, and a statement of your assets and liabilities is necessary for SARS to calculate the exit tax you will need to pay before you can have your designation changed to non-resident.
What is a statement of assets and liabilities for individuals?
Also known as a personal financial statement, this is a record that shows SARS how you own (assets) and how much you owe (liabilities). The difference between the assets and liabilities determines your net worth. If your liabilities exceed your assets, you have a negative net worth.
What is the purpose of a statement of assets and liabilities?
This statement is used by SARS to ensure that you are not leaving the country and attempting to abandon your debt. If you do have debt, you will need to be able to show that you have made arrangements with your credit providers to pay off what you owe from abroad.
This statement of assets and liabilities is also used by SARS to calculate exit tax for the purposes of tax emigration. It shows which of your assets qualify for capital gains tax, and which assets are to be excluded. If most of your assets are for personal use, or the exclusions apply, you might not land up owing any exit tax.
- What you need to know about how exit tax is calculated in South Africa
- The low down on capital gains tax when tax emigrating
When do you need a statement of assets and liabilities?
When you make your application for Tax Compliance Status (TCS) in respect of emigration, you will need to submit your financial statement of assets and liabilities along with the various other documents that verify your intention to relocate permanently from South Africa and justify your request to cut tax ties with SARS.
If you are a first time or new emigrant –
Your statement of assets and liabilities must cover the previous three tax years and you must list all of your investments, loan/credit accounts and any distributions (payouts) from any local or foreign companies or trusts in which you have an interest or hold a stake.
If you emigrated a number of years ago –
If you no longer hold any assets or liabilities in South Africa and you relocated from some time back without formalising your emigration with the South African Reserve Bank (SARB) you need to submit a nil statement of assets and liabilities for the previous three tax years.
Things to note about your Tax Compliance Status (TCS) in respect of emigration:
- Your exit tax is calculated based on a deemed disposal of assets, if applicable.
- You are treated by SARS as if you sold all your worldwide assets the day before you left South Africa, at market value on that date.
Read more: SARS Tax Compliance Status PIN: what is it and how do I get it?
Concerned about that Capital Gains Tax?
When you cease to be a tax resident there is deemed capital gain or loss, which is the calculated difference between the total value of your taxable capital assets (leaving out certain exclusions) and their purchase value on the day you ceased being tax resident.
Tax emigration is considered a “deemed capital gain” because you do not actually need to have sold any of your assets in order to be taxed on them for exit tax purposes. This deemed capital gain is treated in the same way as an actual capital gain, meaning it is included in your income tax return, and is not considered a separate tax category or tax item.
Smart advice: Supplying market valuation statements for your assets listed in your statement of assets and liabilities as at the date of emigration will ensure greater accuracy in the calculation of capital gains/losses to be included in your tax liability for the relevant tax year.
- Tips on how to manage capital gains tax on emigration from South Africa
- Do I still need to submit my South African tax returns if I’ve emigrated?
FinGlobal: tax emigration specialists for South Africans
Cutting ties with SARS can get complicated, especially given how much paperwork is involved. Choosing FinGlobal as your tax emigration partner means choosing convenience, and peace of mind. We offer fully remote services and can handle the entire process for you, including clear instructions on how to handle requirements such as your statement of assets and liabilities, ultimately providing you with completed documentation that is ready to be signed by you, and submitted by us to SARS on your behalf. No sweat.
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