Financial Emigration - Have you?

[TEXTILE GUY]

So, I am looking at finally considering financial emigration in 2023.

I was advised a few years ago, not to embark on this process until I was 100% sure that I was not planning on returning to SA.
At this point, I am pretty sure that I wont return - but the hankering to go back SA is strong - Africa is ones blood.

I should add I have no assets in SA any longer other than a car, and around R2m in an account there.
No other investments or ties to SA other than I pay tax on foreign earnings where necessary as advised by the chap who does my tax.

Has anyone been through this - I am sure folks have.

Tips, insights advice - all welcome.

Thanks.

 

[Affieplaas]

http://financialemigration.co.za/downloads/Expatriate-Tax-Compliance-and-Tax-Residency.pdf

The fact that you have very little assets in SA should be your biggest concern. Note the section under “exit tax” in the link above on page 7. It effectively means that all your foreign assets must be valued on the day that you officially financially emigrate and you then need to pay capital gains tax on the growth. This can be a massive amount of money if for instance you own a property in the USA that was bought a few years ago and doubled in value as the US property bubble grew.

 

[TEXTILE GUY]

http://financialemigration.co.za/downloads/Expatriate-Tax-Compliance-and-Tax-Residency.pdf

The fact that you have very little assets in SA should be your biggest concern. Note the section under “exit tax” in the link above on page 7. It effectively means that all your foreign assets must be valued on the day that you officially financially emigrate and you then need to pay capital gains tax on the growth. This can be a massive amount of money if for instance you own a property in the USA that was bought a few years ago and doubled in value as the US property bubble grew.

Luckily - I have not bought property as yet and probably wont based on what you say here - dont want that issue.

Thanks for the linky.

 

[bchip]

So, I am looking at finally considering financial emigration in 2023.
...
Thanks.

This is a complicated area, and theres a lot of confusing terminologies (like "financial emigration" - an exchange control process that fell away in March 2021)
You need to get all your returns inline with your tax status as soon as possible - with a professional.
Chances are your crossing over the DTAs and dont even know it.

Your welcome to DM me if you need a name of someone, but either way its not something that you want to put off.

 

[bchip]

Luckily - I have not bought property as yet and probably wont based on what you say here - dont want that issue.

Thanks for the linky.

Affieplaas is correct with the exit charge, but its on the date that you left, so its not a matter of what you own in the US,
more what you owned at the day you left (most likely stuff in SA thats non-cash) irrelevant if you actually sold it or not

E.g. If you still had a car in SA the day you left, that car was deemed to have been sold for market value.
You owe SARS those taxes, and every year you havent declared it it means your returns are wrong.

 

[TEXTILE GUY]

This is a complicated area, and theres a lot of confusing terminologies (like "financial emigration" - an exchange control process that fell away in March 2021)
You need to get all your returns inline with your tax status as soon as possible - with a professional.
Chances are your crossing over the DTAs and dont even know it.

Your welcome to DM me if you need a name of someone, but either way its not something that you want to put off.

Thanks - will PM you later today.

 

[roadcat]

I did it when I moved to the US in 2019. Basically ended up being a coordination between my financial advisor, my tax consultant and Nedbank. I moved everything out, left one bank account in SA. Once everything was done could get my AG RA out as well.

I still do SA tax returns - share options, and that AG RA. Hopefully from next one, will be basically blank returns.

Followed the normal process. Collated all funds into one blocked account (Nedbank). Jump through a few hoops to get tax clearance certificate, submit a bunch of documents SARS wanted, got TCC. Did it all from here, though I did prep tax and financial consultants before I left SA.

One additional step was to get a certificate of residency from the IRS. Had to send off a form via mail, got certificate back within 30 days. At least mail works here as you probably know.

Let me know if you need any details.

 

[TEXTILE GUY]

I did it when I moved to the US in 2019. Basically ended up being a coordination between my financial advisor, my tax consultant and Nedbank. I moved everything out, left one bank account in SA. Once everything was done could get my AG RA out as well.

I still do SA tax returns - share options, and that AG RA. Hopefully from next one, will be basically blank returns.

Followed the normal process. Collated all funds into one blocked account (Nedbank). Jump through a few hoops to get tax clearance certificate, submit a bunch of documents SARS wanted, got TCC. Did it all from here, though I did prep tax and financial consultants before I left SA.

One additional step was to get a certificate of residency from the IRS. Had to send off a form via mail, got certificate back within 30 days. At least mail works here as you probably know.

Let me know if you need any details.

Awesome - thats what I needed - shot broooooo

 

[Sinbad]

Couldn't be bothered. Only thing I have left in SA is a tiny RA, not worth the hassle of getting it out.

 

[skimread]

Ugh. South Africa has become modern day slavery for its people. Other countries if you leave you only pay tax in the location you are 6 months or longer in. SA however sees you as a citizen of the country and you are tax indefinitely even if you are not even in SA. It's like living in America during slavery and running away from your plantation. You still belong to the plantation owner whos farm you ran away from who wants financial compensation annually. How is SA not this if no other country has these laws? Other countries have refugees. We are slaves. A modern day spin on the dompas with the exception it is worldwide and it costs you a fortune in tax specialists and specialist accountants fees yearly. You can't even run away from it. But just moan about crime, corruption, load shedding that these laws go under the radar.

Imagine the apartheid government taxed those ANC guys who went overseas and then said they owed these huge amounts and demanded all their paperwork and charged them all these admin fees and required them to have an accountant. It would be absurd. SA just has exchanged a dompas for complicated paperwork and taxes no other country has. But foreigners are treated like gold. They legally don't even have to pay tax. That is why we have so many in our country.

 

[Sinbad]

Ugh. South Africa has become modern day slavery for its people. Other countries if you leave you only pay tax in the location you are 6 months or longer in. SA however sees you as a citizen of the country and you are tax indefinitely even if you are not even in SA. It's like living in America during slavery and running away from your plantation. You still belong to the plantation owner whos farm you ran away from. How is SA different if no ohter country has this rule. Other countries have refugees. We are slaves. A modern day spin on the dompas with the exception it is worldwide and it costs you a fortune in tax specialists and specialist accountants fees yearly. You can't even run away from it.

Imagine the apartheid government taxed those ANC guys who went overseas and then said they owed these huge amounts and demanded all their paperwork and charged them all these admin fees and required them to have an accountant. It would be absurd. SA just has exchanged a dompas for complicated paperwork and taxes. But foreigners are treated like gold. They don't even have to pay tax. That is why we have so many in our country.

Not strictly true
There are a couple of tests to determine tax residency. If it's pretty obvious you don't pass those tests, then you're not taxed in SA.

 

[skimread]

Not strictly true
There are a couple of tests to determine tax residency. If it's pretty obvious you don't pass those tests, then you're not taxed in SA.

But you have to do paperwork annually. It's not like you go overseas and say you don't have to do your SA taxes twice a year. They will penalize the **** out of you on your income. You have to file your overseas income and if you earn a average salary you have to pay tax in South Africa as well over a certain amount.

Read this

http://financialemigration.co.za/downloads/Expatriate-Tax-Compliance-and-Tax-Residency.pdf

the burden is no on the tax man to prove residency. It is on you and you have to follow strict rules so much so you need experts twice a year that cost a lot of money to assist you.

 

[Sinbad]

But you have to do paperwork annually. It's not like you go overseas and say you don't have to do your SA taxes twice a year. They will penalize the **** out of you on your income. You have to file your overseas income and if you earn a average salary you have to pay tax in South Africa as well over a certain amount.

Read this

http://financialemigration.co.za/downloads/Expatriate-Tax-Compliance-and-Tax-Residency.pdf

the burden is no on the tax man to prove residency. It is on you and you have to follow strict rules so much so you need experts twice a year that cost a lot of money to assist you.

Don't believe the fearmongering adverts.

The rules are not strict at all.

The determination of whether an individual ceases to be a tax resident in South Africa is based on the manner in which such individual has been a tax resident in South Africa. If the taxpayer has been an ordinarily tax resident, it is a factual enquiry on whether or not that person’s subjective intention to cease to be ordinarily resident in South Africa and no longer make South Africa his or her real home, is supported by various objective factors. If a person has ceased to be an ordinarily tax resident, it will be from the day such person ceased his or her residence.

Factors that will be taken into account to determine whether a taxpayer has ceased to be a tax resident of South Africa:

• The type of visa on which you have gone to the foreign country.
• Proof of permanent residence in the foreign country (if applicable).
• A certificate of tax residence from the foreign revenue authority or a letter from the authority that indicates that you are regarded as a tax resident in that country (if available).
• Details of any property that you may still have available in South Africa. Indicate the purpose for which such property is being used.
• Details of any business interest (e.g. investment and employment) that you may still have in South Africa.
• Details of your family. Indicate whether any family members are in South Africa and the reasons therefor.
• Details of your social interests (e.g. gym contract, recreational clubs and societies) and location of your personal belongings.
• Details of any return visits to South Africa, their frequency and the reason for undertaking such visits.

Based on that, it's easy enough to determine that you're non tax resident if you've actually emigrated.
If you're just working overseas in a tax haven, you won't manage to get this right, by design.

 

[Sinbad]

But you have to do paperwork annually. It's not like you go overseas and say you don't have to do your SA taxes twice a year. They will penalize the **** out of you on your income. You have to file your overseas income and if you earn a average salary you have to pay tax in South Africa as well over a certain amount.

Read this

http://financialemigration.co.za/downloads/Expatriate-Tax-Compliance-and-Tax-Residency.pdf

the burden is no on the tax man to prove residency. It is on you and you have to follow strict rules so much so you need experts twice a year that cost a lot of money to assist you.

Also don't conflate financial emigration with determination of tax residence.

 

[skimread]

Also don't conflate financial emigration with determination of tax residence.

Well the issue is you have to fill in all your overseas income to SARS and pay tax on it as well if you earn just a average salary. There is a reason people financially emigrate. It is to not have to pay SARS tax even if they are overseas, not in SA and not working for a SA company.

 

[Affieplaas]

Well the issue is you have to fill in all your overseas income to SARS and pay tax on it as well if you earn just a average salary. There is a reason people financially emigrate. It is to not have to pay SARS tax even if they are overseas, not in SA and not working for a SA company.

That is pretty standard as far as personal income tax goes and most countries follow this principle. You have to declare all your income on your tax return and you can then claim a deduction if you were not a tax resident during that year. US citizens has it the worst as you remain a tax resident in the USA even if you permanently live and work overseas.

A recent (2020) loophole that has been closed and is probably the one you are moaning about is that people go and work in no-personal income tax countries (such as UAE) and leave their wife and kids in SA where they use public health services, infrastructure and government subsidised schooling. As the husband is out of country for more than 183 days (60 being consecutive) plus pays no income tax where he works, the family is absolutely coining it with no tax and full government provided benefits with wife / kids. To stop this SARS introduced the rule that all amounts over R1.25m will be fully taxed even if you are out of country for longer than 183 days but the foreign tax paid in that country can then be deducted where SA has a double taxation agreement with the country. So these folks working in no tax countries will have to pay tax in SA.

This is also applicable to people living in countries where the income tax rate is lower than SA for example New Zealand. If you live in NZ and earn more than $180k per year you will be taxed at an incremental rate of 39%. That converts to a salary of around R2m. In SA if you earn more that R1.73m per year you pay 45% incremental tax. That means that these SA Kiwis will have to pay the SA government 6% tax (45% minus 39%) on the NZ salary amount above R1.25m (SA has a double tax agreement with NZ).

This is the key reason why people do the financial emigration, to avoid this.

 

[Sinbad]

That is pretty standard as far as personal income tax goes and most countries follow this principle. You have to declare all your income on your tax return and you can then claim a deduction if you were not a tax resident during that year. US citizens has it the worst as you remain a tax resident in the USA even if you permanently live and work overseas.



This is also applicable to people living in countries where the income tax rate is lower than SA for example New Zealand. If you live in NZ and earn more than $180k per year you will be taxed at an incremental rate of 39%. That converts to a salary of around R2m. In SA if you earn more that R1.73m per year you pay 45% incremental tax. That means that these SA Kiwis will have to pay the SA government 6% tax (45% minus 39%) on the NZ salary amount above R1.25m (SA has a double tax agreement with NZ).

This is the key reason why people do the financial emigration, to avoid this.

All the above is only valid if you're deemed ordinarily resident in SA.
Once you've moved overseas (so you fail the presence test, and a subjective review of your status shows that your normal home is not in SA), then you are NOT liable to SARS for tax on income earned outside SA, only on income earned IN SA.

 

[skimread]

All the above is only valid if you're deemed ordinarily resident in SA.
Once you've moved overseas (so you fail the presence test, and a subjective review of your status shows that your normal home is not in SA), then you are NOT liable to SARS for tax on income earned outside SA, only on income earned IN SA.

OK how do I prove my normal home is not in SA.

Which of the following have to apply
- No Home address
- No bank account/ bank account with minimal money
- No car
- Not married
- No pension

Also how do you prove a negative? Write an affidavit saying I have nothing in SA except born here?

UAE might be no tax but rent is damn expensive. So it sounds like your are saving a lot of money so SARS can tax it but in fact you don't. So I would prefer not to pay tax.

I am unsure what I need to do? I know people are going to say go to a tax practitioner but it is really hard to get info on this. So many conflicting info out there.

 

[Sinbad]

OK how do I prove my normal home is not in SA.

Which of the following have to apply
- No Home address
- No bank account/ bank account with minimal money
- No car
- Not married
- No pension

Also how do you prove a negative? Write an affidavit saying I have nothing in SA except being a citizen?

I am unsure what I need to do? I know people are going to say go to a tax practitioner but it is really hard to get info on this. So many conflicting info out there.

Show your home address in the overseas country
Show your basis for living there (visa, passport etc)
Statement that you have no close family in SA
Statement that you have no assets or interests in SA.
SHow you haven't visited in x number of months, and if you did visit, why you visited.

I'm still waiting to be audited on this, but for me just clicking on the checkbox "ceased to become tax resident" and filling in the date on my ITR12 seems to have done the trick. The return was accepted, no contact since then.

Well the issue is you have to fill in all your overseas income to SARS and pay tax on it as well if you earn just a average salary. There is a reason people financially emigrate. It is to not have to pay SARS tax even if they are overseas, not in SA and not working for a SA company.

No, the only reason to financially emigrate (that I'm aware of) is to get money out of retirement annuities early. Tax residency cessation and financial emigration are not the same thing.

 

[skimread]

Show your home address in the overseas country
Show your basis for living there (visa, passport etc)
Statement that you have no close family in SA
Statement that you have no assets or interests in SA.
Show you haven't visited in x number of months, and if you did visit, why you visited.

I'm still waiting to be audited on this, but for me just clicking on the checkbox "ceased to become tax resident" and filling in the date on my ITR12 seems to have done the trick. The return was accepted, no contact since then.

No, the only reason to financially emigrate (that I'm aware of) is to get money out of retirement annuities early. Tax residency cessation and financial emigration are not the same thing.

Thanks for the info.. This whole thing seems scary as SARS can ruin you on a technicality.

So you don't have to pay tax over 1.25 million after you did this?

Do you cash your pension, are you allowed to cash the full amount or can you keep it?

What if you have a brother, sister and mother but you are not close to them and do not live with them? Do you have to fill in a form to disavow them or affidavit saying you haven't spoken to or do not intend to speak to them or do you have to do some type of legal emancipation or make a statement claiming that all 3 abused you emotionally.