Leaving South Africa doesn’t necessarily mean escaping the South African Revenue Service (SARS) tax system. As a nation, we are responsible for paying various taxes on our worldwide income and estate duty on our worldwide assets upon death. This extends to those who have emigrated in search of greener pastures.
In this article, we’ll walk you through the vital tax considerations and offer guidance to assist South Africans abroad consistent with the Income Tax Act and South Africa’s Double Tax Agreement.
Tax implications when formally emigrating from South Africa: Capital Gains Tax
Upon leaving South Africa, the first thing to be aware of is the capital gains tax arising from the deemed disposal of your worldwide assets. Failure to declare these transactions timeously will lead to penalties and interest charges imposed by SARS. This capital gains tax also affects provisional tax payments which, if not considered, could result in additional financial hardship.
Becoming a South African non-tax resident
Once considered a non-tax resident, your tax liability will change significantly. This status brings several perks:
- South African taxes will only apply to domestic-sourced income
- Foreign income will no longer be taxable in South Africa
- Estate duty will no longer apply to any assets outside of South Africa
Qualifying as a non-resident for tax purposes
To qualify as a non-resident for tax purposes, individuals must satisfy specific requirements detailed in the South African Income Tax Act and the Double Taxation Agreement. These requirements include:
- Living in another country for more than 183 days during a tax year
- Living in another country for a continuous 60-day period within that tax year
- Meeting the “treaty-tie-breaker” rules defined in the applicable Double Tax Agreement (if one applies)
It’s crucial to keep in mind that every case is unique, and proper assessment by a qualified tax professional is highly advisable.
Actionable advice for South Africans emigrating:
- Consult with a qualified tax professional before emigrating to ensure compliance with the Income Tax Act and the Double Taxation Agreement.
- While being a South African tax resident, prepare to pay SARS taxes on your worldwide income and estate duty on your worldwide assets.
- Ensure compliance with capital gains tax requirements upon formally emigrating from South Africa.
- Review your non-tax resident status according to South African Income Tax Act and any applicable Double Taxation Agreement.
Make there right financial moves before emigrating from South Africa.
Tax emigration (also known as financial emigration) has many implications that must be carefully considered before taking the leap. To ensure compliance with all applicable regulations and to avoid penalties, it is essential to consult a qualified tax professional who can advise on how best to manage your taxes while living abroad as well as any capital gains tax requirements upon leaving South Africa. With some careful planning, you can make sure you’re making smart financial decisions when it comes time for your big move!
Contact us for a free and no-obligation consultation regarding your tax exit from South Africa.
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