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The cost of coming home – tax implications of returning to South Africa after emigration

The cost of coming home – tax implications of returning to South Africa after emigration

June 26, 2024


For some South Africans living abroad, the call of home eventually becomes too strong to ignore. Many regret leaving South Africa in the first place, while others are drawn by factors such as lifestyle, cost of living, and the chance to reconnect with loved ones, all of which play a role in the decision to return. South Africa’s pleasant climate adds another layer of appeal, especially for those who’ve endured harsh winters elsewhere. You are not alone if you are debating the pros and cons of returning home to South Africa as an expat.

If you find yourself awake at night with the question “should I move back to South Africa?” foremost on your mind, we’ve got something that might help. We’ve compiled a quick, straightforward guide on what you need to know about the tax implications of moving back to South Africa.

Understanding your legal status as an expat before returning to South Africa

Before diving headfirst into planning your return and reunion with loved ones left behind, it’s vital to understand your tax and financial emigration status clearly. Consulting a professional advisor is highly recommended to avoid costly missteps. This way, your financial and tax situation can be accurately assessed to provide a personalised roadmap for a smooth transition when migrating your finances back to South Africa

The importance of your non-resident status as an expat before moving back to South Africa

Maintaining non-resident status before returning to South Africa is vital. This can prevent you from being inadvertently classified as a resident for tax purposes, which can lead to complications around your worldwide assets.

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Once you’ve confirmed your non-resident status, it’s time to strategically plan your financial affairs before returning home. This includes meticulously evaluating your assets and liabilities, especially when bringing capital back to South Africa. While buying property is undoubtedly a high priority, it is important to time it correctly to avoid future problems.

Planning upfront for the tax implications of moving back to South Africa

A detailed plan is essential for managing the tax implications of your various assets and income streams, such as foreign pensions, rental income, and offshore trusts. A financial planner can help you make informed decisions about what to bring back to South Africa, what to leave behind, and how to structure your assets for optimal tax efficiency. It is important to remember that in South Africa, residents are taxed on their global income, regardless of where it is remitted.

Furthermore, estate duty needs to be given serious consideration. Proper structuring is necessary for high-net-worth individuals to minimise hefty estate duty taxes further down the line. With careful planning, a substantial portion of an estate could be recovered to the 25% tax rate applicable to asset values exceeding R30 million before even factoring in capital gains tax and other potential levies. This can make South Africa less attractive for wealthy retirees who still need to meticulously plan and execute their return.

Strategic residency planning for expats returning to SA

South Africa’s nuanced approach to tax residency offers some flexibility for expats returning home. Discussing this aspect with your advisor can help you avoid costly errors in the future.

Making the most of cost-effective business structures

If you plan to work in South Africa upon your return, understanding the cost structure for setting up a business is essential. Establishing a South African company can be a cost-effective option compared to alternatives. However, be mindful of anti-avoidance provisions that could create complications.

Plan to head into employment when you return to South Africa. Ensuring you are correctly registered with the South African Revenue Service for income tax purposes will be necessary. Remember, you will be taxed on all income from a South African source while reestablishing your tax residency.

Charting a smooth course home for South African expats

It’s not a decision that you should make lightly. As tempting as it may be to get home as quickly as possible, the key to a successful return lies in meticulous planning and a thorough understanding of the tax implications. Every step is important, from ascertaining non-resident status to properly structuring your financial portfolio.

Reversing financial emigration for expats returning to South Africa

If you previously formalised your emigration with the South African Reserve Bank (before March 1, 2021), you must reverse your financial emigration status. Consulting an immigration specialist is highly recommended for assistance with:

  • Eligibility assessment: Review your past, present, and future circumstances to determine if you qualify to reverse your non-resident exchange control status.
  • Tax compliance review: Running a tax diagnostic to assess your current standing with the South African Revenue Service (SARS) and identify any necessary compliance actions.

The application process: Once you’ve confirmed eligibility, you must complete the necessary SARS forms.

These forms typically require:

  • Certified copy of your ID or passport
  • Proof of your South African address

The South African Revenue Service (SARS) now handles financial emigration matters, so your completed application will be submitted to them.

Reversing tax emigration for expats moving back to South Africa

If you completed tax emigration through SARS after 2021, you must assess your eligibility to have your tax emigration reversed. Factors that will be considered here include:

  • Physical return: You must have physically returned to South Africa.
  • Permanent stay: Your intention must be to stay permanently in South Africa.
  • Objective proof: You’ll need evidence to support your intention to stay permanently. This could include family ties in South Africa, property ownership, or employment.

The process of reversing your tax emigration:

  1. Inform SARS: Submit the Registration, Amendments And Verification Form (RAV01) electronically through SARS eFiling. Indicate the date you became a resident again on the form.
  2. Supporting documentation: Prepare a signed declaration with supporting documents to submit to SARS. This includes:
    – A letter explaining your circumstances and intention for permanent residency.
    – A copy of your passport or travel diary.
    – Proof of your South African residence (e.g., utility bill).
    – Documents demonstrating economic ties to South Africa (such as employment contracts property ownership documents).

Tax implications of reversing tax emigration

Once you re-establish tax residency, you’ll be subject to South African tax on your worldwide income from the date you became a resident again.

FinGlobal: financial migration specialists for South African expats

Ready to get the ball rolling on moving back to South Africa? FinGlobal can assist. Our team of certified international financial planners, lawyers, chartered accountants, tax specialists and bankers is waiting to provide the expertise you need to smooth your transition back to South Africa. We’ll help you every step of the way, ensuring that you and your money make it back to South Africa safely and tax-compliant.

To find out more about our cross-border financial and tax services, leave your contact details below, and we’ll contact you to discuss your triumphant return to South Africa.


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