Government moving to hold onto South Africans’ retirement funds – legal expert

JacquesZA

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It's pretty simple. Financial emigration will not end your South African tax residency. Depending on your circumstances SARS will still regard you as a tax resident regardless of whether or not you have financially emigrated. There are good reasons to go through the financial emigration process if you want to liquidate your RA or if you want to move substantial amounts of money (like tens of millions of rands) offshore, but the actual act of financially emigrating will, by itself, not convince SARS that you are no longer a tax resident.

And the presence test will convince sars, ie i am in country x and have not stepped foot in sa for linger than y days?
 

Sinbad

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Formal (financial) emigration and ceasing your tax residency are two completely different things. Formally emigrating is an exchange control event which means you cease being subject to exchange control. It has absolutely no effect on whether or not you remain a South African tax resident. You can only cease your South African tax residency by applying either the ordinarily resident test or the physically present test. These so-called experts who try to sell financial emigration as the cure-all for ceasing your South African tax residency are just plain lying.
You have to apply both tests... Either one can be used to deem you tax resident
 

Hamster

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Meaning you returned to SA within z days? How many days and do holiday count?
Think it's 5 years. Then SARS taxes you on all the income they missed out on.

It's probably more involved than that. I've only seen it mentioned once or twice during my research which is "alarming" because it seems like you have to actively search for the downsides of formal emigration to get the whole picture.
 

JacquesZA

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Think it's 5 years. Then SARS taxes you on all the income they missed out on.

It's probably more involved than that. I've only seen it mentioned once or twice during my research which is "alarming" because it seems like you have to actively search for the downsides of formal emigration to get the whole picture.

How many days counts as present ? So ie if its a 3 week holiday?
 

deweyzeph

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You have to apply both tests... Either one can be used to deem you tax resident

The ordinarily resident test trumps the physical presence test. So even if you are out of the country for X number of days of the year, if you pass the ordinarily resident test then you will still be considered a tax resident. This is the reason many South Africans who have been living overseas for years might still be considered tax residents.
 

RVQ

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How many days counts as present ? So ie if its a 3 week holiday?

You should stay outside SA at minimum 330 days in each tax year.

The people that work overseas and still have their families, homes and assets in SA generally fail. Expat Tax is going to hit these guys hard, especially the ones working in the mines and tech projects throughout Africa; security, hotels, transport provided to them as part of their employment package is included in the tax calculation.

Most South Africans however, are leaving SA with no intention to return i.e. they disposing all assets, and transfering funds abroad. They will most likely remain outside SA for 330 days and their will be no local assets linking them to SA, combined with DTAs, R1.25 million allowance, foreign pension and interest exceptions, most will remain uneffected by the Expat Tax.

Financial Immigration however allows you to also liquidate your RA which is normally only accessable at 55. If you a multimillionaire it will also allow you to move many millions with less hassle from SARB. What this article is selling you is being able to get that RA out before the ANC does something stupid with pensions but it's best to weigh the value of the RA against the cost and hassle of financial immigration. I'm actually for/interested in the this 3 year rule, be nice to cash in RA after 3 years of leaving or betting yet transferring it with no tax implications
 
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deweyzeph

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How many days counts as present ? So ie if its a 3 week holiday?

An individual will be considered to be ordinarily resident in South Africa, if South Africa is the country to which that individual will naturally and as a matter of course return after his or her wanderings. It could be described as that individual's usual or principal residence, or his or her real home. If an individual is not ordinarily resident in South Africa, he or she may still meet the requirements of the physical presence test and will be deemed to be a resident for tax purposes.

To meet the requirements of the physical presence test, that individual must be physically present in South Africa for a period or periods exceeding –
  • 91 days in total during the year of assessment under consideration;
  • 91 days in total during each of the five years of assessment preceding the year of assessment under consideration; and
  • 915 days in total during those five preceding years of assessment.
An individual who fails to meet any one of these three requirements will not satisfy the physical presence test. In addition, any individual who meets the physical presence test, but is outside South Africa for a continuous period of at least 330 full days, will not be regarded as a resident from the day on which that individual ceased to be physically present.

If the individual is neither ordinarily resident, nor meets the requirements of the physical presence test, that individual will be regarded as a non-resident for tax purposes. This means that individual will be subject to tax only on income that has its source in South Africa, for example, interest earned from a South African Bank; rental income earned from a property in South Africa; and services rendered in South Africa.

 

deweyzeph

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Here's a SARS interpretation note on how the physical presence test works:


Basically if you have lived in SA most of your life you will need to initially make sure you are out of South Africa for 330 continuous days, but once you pass the requirements of the test you can safely return to SA for no longer than 91 days each year without becoming a tax resident again.
 

JayM

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Here's a SARS interpretation note on how the physical presence test works:


Basically if you have lived in SA most of your life you will need to initially make sure you are out of South Africa for 330 continuous days, but once you pass the requirements of the test you can safely return to SA for no longer than 91 days each year without becoming a tax resident again.

If you still have (immediate) family here, property, pension, businesses, bank accounts or other assets, I'm pretty sure they'll deem you ordinarily (and therefore tax) resident regardless of how many days you spend outside the country.

That's why selling up (and formal emigration) are probably a good idea - it reduces the likelihood of being deemed ordinarily resident, and also removes any assets they can seize after you become non tax compliant.
 

deweyzeph

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If you still have (immediate) family here, property, pension, businesses, bank accounts or other assets, I'm pretty sure they'll deem you ordinarily (and therefore tax) resident regardless of how many days you spend outside the country.

That's why selling up (and formal emigration) are probably a good idea - it reduces the likelihood of being deemed ordinarily resident, and also removes any assets they can seize after you become non tax compliant.

Yes, I did point out earlier that the ordinarily resident test trumps the physical presence test. SARS also has co-operation agreements with tax authorities all over the world, so even if you move overseas with all your assets, they can still recover whatever they deem to be owing to them through the tax authorities of the country you're currently living in.
 

LCBXX

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You all know why this is happening?

It's because most of you think you can negotiate with the ANC.
 

JacquesZA

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I have disposed of all sa assets ( small RA and my wifes Ra left, we are in the process of getting that and then will close my SA bank account. )

Sad part is how many people just like me where middle class tax paying citizens, contributed. Ot only to tax and economy but in most cases employed people... all left or busy or planning leaving.

You can only rob and oppress so much before people have had enough.
 
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JayM

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so even if you move overseas with all your assets, they can still recover whatever they deem to be owing to them through the tax authorities of the country you're currently living in.

This is generally applicable to tax evasion cases of significant value - I can't envisage any tax authority in a 1st world country recovering money from a new taxpayer who is just a salary earner if their clear intention was to leave SA for good (and did all the things like closing accounts, cashing out pensions, selling property etc), especially if they can demonstrate they've always been tax compliant while resident in SA.
 

R/SGT

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This is generally applicable to tax evasion cases of significant value - I can't envisage any tax authority in a 1st world country recovering money from a new taxpayer who is just a salary earner if their clear intention was to leave SA for good (and did all the things like closing accounts, cashing out pensions, selling property etc), especially if they can demonstrate they've always been tax compliant while resident in SA.
The treaty is often pointed to, but within the UK & UK it runs afoul of GDPR or General Data Protection Regulations, which frown on sharing data except in extreme circumstances.
I have yet to run across any successfull use of the treaty by SARS.
 

Vrotappel

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Remember that the DTAs overrule any local legislation as they are international agreements.

DTAs contain tie breaker clauses to determine residence. For example the one with the UK:

Article 4
Residence
1. For the purposes of this Convention, the term "resident of a Contracting State" means any person who, under the laws of that State, is liable to tax therein by reason of that person’s domicile, residence, place of management, place of incorporation or any other criterion of a similar nature, and also includes that State and any political subdivision or local authority thereof.
2. Where by reason of the provisions of paragraph 1 of this Article an individual is a resident of both Contracting States, then that individual’s status shall be determined in accordance with the following rules:
(a) the individual shall be deemed to be a resident solely of the Contracting 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 sub-paragraph (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 Contracting 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 Contracting States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.

So step 1 in emigration would be to make yourself a resident in your adopted country in terms of the applicable DTA. Once this makes you a resident SARS cannot do anything.

Witt the UK for example you can then score:

Subject to the provisions of paragraph 2 of Article 18 of this Convention:
(a) pensions and other similar remuneration paid in consideration of past employment, and
(b) any annuity paid,
to an individual who is a resident of a Contracting State shall be taxable only in that State.

SARS can no longer tax pension from SA. Similar remuneration would include your pension and provident fund lump sum payments.

So you would resign in SA. Place your penion/provident fund lump sum into a preservation fund. Emigrate, comply with the DTA and then withdraw from your SA funds tax free.
 

GoB

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Stanlib Global. You can deposit from a bank account in your name (from anywhere in the world) and you can draw the funds from anywhere in the world. You would need a broker to setup the account. Takes a few minutes. Nedbank don't allow you to do it online, but I opened a Standard bank (R4.95 pm) account. here is an example of a payment i made on Friday. Cost a whole R259 in fees for R22.5K. A friend did R500K and it cost him R700.

If you don't ever want it to become part of your estate when your wife smothers you with a pillow you die peacefully in your sleep, add a second signatory to the account. If one of you dies the other just remains with full access to the account.

The fund is also doing quite well. I deposited R340k something in June. It was just shy of $20k. In 4 weeks it had increased by more that $1k. I went for the more aggressive portfolio, but there is a low risk option too.

Cool but this isn't an offshore account (i.e. the money has officially left the country e.g. as part of your R1m yearly discretionary allowance) right?
It's just invested in a fund which tracks assets in another country, same as other local global equities/bonds funds?

There's a difference because the former is still subject to yearly foreign transfer limits or transfers allowed after financial emigration.
 
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