Emigration and tax thread.

[marco]

We emigrated in June 2014 to Portugal and officially did so via SARS and SARB and got a tax clearance for emigration certificate.

I kept my shares on the JSE and it is a substantial amount as we have to live off it. I also knew that we had to pay Exit Tax on the shares as CGT as a deemed sale on the date of emigration and a deemed purchase at the same price on the day after.

This could only be done after we arrived in Portugal so I contracted a Charted Accountant in Portugal that studied at UCT and worked for PwC Cape Town. He submitted my Portuguese tax but could not submit my SA tax as my 2014 tax was not yet concluded. It said "Human intervention is required" or something. So he dropped out.

Got a Cross Border Tax Consultant in SA registered as a Master Tax consultant with SAIT and registered with SARS and other bodies. He says "No Exit Tax payable".

Four accountants later I find that the Exit Tax is due to SARS. In the mean time Portugal IRS are sending me penalties and fines for late payment. Total about 12 000 €.

Fifth accountant in SA manages to correct my tax and submit my Exit Tax that was accepted at R60k. This re-adjusts the base cost of my shares to the date of emigration. Start on a new slate for Portugal tax. So I thought.
Will post more later.

 

[HavocXphere]

Think you might be confusing concepts there mate.

SA doesn't have an "Exit tax". What is in place though is:
A) A charge on amounts above the foreign exchange limits - sometimes called exit charge, or exit levy. SARB Exchange Control Regulations
B) The deemed disposal on emigration for CGT - sometimes ALSO called exit charge. SARS Income tax act

That's why the one accountant is telling you one thing and the other accountant something else...because they're not talking about the same thing. From memory your share portfolio is well below FX limits hence no charge there. On the deemed disposal - yup - that would indeed be payable, but surely the tax clearance cert would have settled the matter?

 

[marco]

Most DTA's state that tax on securities such as stock investments are only taxable by the country of residence. So no CGT is payable to SA on any gains made on the JSE. Only Portugal has taxing rights. So I thought.

The DTA does not define residency and only states the 183 day stay period will make you a resident for taxation. It does not define from when you are tax resident. This can be for the whole tax year or split from your date of entry to tax year end.

SA deems it to be from date of exit. The domestic law in Portugal states that it is from the date of your intention to stay such as a lease agreement and it will apply for the whole tax year regardless of the 183 day rule.

Now we have a Catch 22 here. The DTA states that CGT is only payable to the country of residence. Portugal domestic rules regard me as tax resident for the whole tax year for CGT but SA wants the CGT as well. I cannot be tax resident in 2 countries at the same time.

SARS did say that CGT is only payable to the country of residence.

 

[HavocXphere]

Most of that sounds uhm less than correct. But lets expedite this:

Check the Portuguese side. Chance of that story about being tax resident from first day in tax year being true is near zero.

Backdating of tax residence beyond 1st day of arrival is highly unlikely. And yes you can be tax res in two countries at the same time.

 

[marco]

I stick with the fact that one cannot be tax resident in two countries.

There are ways to determine tax residency:

a) The individual shall be deemed to be a resident solely of the State in which a permanent home is available to the individual; if a permanent home is available to the individual in both States, the individual shall be deemed to be a resident solely of the State with which the individual’s personal and economic relations are closer. (centre of vital interests);

b) If sole residence cannot be determined under the provisions of subparagraph a),
The individual shall be deemed to be a resident solely of the State in which the individual has an habitual abode;

c) If the individual has an habitual abode in both States or in neither of them, the individual shall be deemed to be a resident solely of the State of which the individual is a national;

d) If the individual is a national of both States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.

So what it effectively says is that you cannot be tax resident in both countries. You may be required to pay tax for some income in states where you have dividends or rental income but your country of residence has sole right to your world wide income but you will get credit for tax paid to that state according to the DTA.

 

[HavocXphere]

I stick with the fact that one cannot be tax resident in two countries.

I narrowly escaped being tax resident in three countries simultaneously last year. (literally 3 days type of narrow)

...didn't read the rest of the post tbh