South Africa’s big expat tax is coming

gregmcc

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I'm one of those who pretty much just left. I did file my tax return for the tax year I was still in SA and earning there, then never again.
I think we all did this :)

So we pay tax here (UK) and then SARS also want us to pay more tax to SA. haaaa haaaaaa haaaaaa. NO!
I'd rather burn my SA passport.
 

GoB

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You don't lose your citizenship or passport if you financially emigrate btw...
 

Scooby_Doo

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Don't forget that if you financially emigrate you trigger a capital gains event. So if you do have any assets in SA you will need to consider that. For those who do the "I don't give a ****" and just leave, if you come into any inheritance or other money after you leave, expect issues around those assets when you try claim.

Edit spelling *emigrate
 
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reactor_sa

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Its hard to financially emigrate as most people have pension funds and money still in SA

Remember its really hard to move large amounts of money overseas as well.

if you are in your 30's and have a pension and properties its not going to be easy.
Was pretty easy for me. You can apply for a R10m allowance per year, more than most in their 30s have (at least non mybb members anyway).
 

Markd

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So if you're living in London, as many saffas are, why is this an issue? There is a double taxation agreement between the two countries that was signed in 2002 that says that you are taxed in the state in which you are 'ordinarily' resident?
 

cguy

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So if you're living in London, as many saffas are, why is this an issue? There is a double taxation agreement between the two countries that was signed in 2002 that says that you are taxed in the state in which you are 'ordinarily' resident?

It’s not an issue. More for people who work in one country while their family resides in SA. It’s an especially big issue if the foreign country has low/no taxation.
 

John Tempus

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Not going to happen. I'll just never return to SA. Will even lose citizenship if I have to.

I thought this applied to South African residents working overseas. If you have moved overseas (permanently) you are no longer a resident so it does not apply?

That is exactly it. If you keep your citizenship this type of daylight robbery will be forced upon your employer to strip from your salary to appease international tax laws if they adhere to it. Some countries play ball, some don't.

So the SA government is telling every ex pat to either get stripped of enough money to force them to come back to SA or be poor as a unwashed dildo overseas or on the other hand force expats to renounce their citizenship permanently.

There is no other sense to this tax law than that. If you live in any reasonable country you might be paying 30-60% tax depending where in the world and your income bracket and then to pay an additional up to 45% on whatever is left is insane.

Imagine somewhere in european country that tax 50% and you have a good job of earning around 10000 euro a month. Now you pay 50% of that to the country and take home 5000 euro but wait now the SA government want a 45% slice of that 5000euro and suddenly you went from a rather well off person in europe to someone just shy of living on the street with 2500euro remaining after the doubletax.
 

cguy

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That is exactly it. If you keep your citizenship this type of daylight robbery will be forced upon your employer to strip from your salary to appease international tax laws if they adhere to it. Some countries play ball, some don't.

So the SA government is telling every ex pat to either get stripped of enough money to force them to come back to SA or be poor as a unwashed dildo overseas or on the other hand force expats to renounce their citizenship permanently.

There is no other sense to this tax law than that. If you live in any reasonable country you might be paying 30-60% tax depending where in the world and your income bracket and then to pay an additional up to 45% on whatever is left is insane.

Imagine somewhere in european country that tax 50% and you have a good job of earning around 10000 euro a month. Now you pay 50% of that to the country and take home 5000 euro but wait now the SA government want a 45% slice of that 5000euro and suddenly you went from a rather well off person in europe to someone just shy of living on the street with 2500euro remaining after the doubletax.

This is nonsense.
 

krycor

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That is exactly it. If you keep your citizenship this type of daylight robbery will be forced upon your employer to strip from your salary to appease international tax laws if they adhere to it. Some countries play ball, some don't.

So the SA government is telling every ex pat to either get stripped of enough money to force them to come back to SA or be poor as a unwashed dildo overseas or on the other hand force expats to renounce their citizenship permanently.

There is no other sense to this tax law than that. If you live in any reasonable country you might be paying 30-60% tax depending where in the world and your income bracket and then to pay an additional up to 45% on whatever is left is insane.

Imagine somewhere in european country that tax 50% and you have a good job of earning around 10000 euro a month. Now you pay 50% of that to the country and take home 5000 euro but wait now the SA government want a 45% slice of that 5000euro and suddenly you went from a rather well off person in europe to someone just shy of living on the street with 2500euro remaining after the doubletax.

Not how it will work.. basically say in this hypothetical EU country you earn 7500€ (R122k) / month.

Now in Netherlands as an example, they have a 30% tax discount so your tax is on 5250€. Not sure what tax rate there is but let’s make this easy and say no increment.. then assume tax is 35%.. so 3412€ + 2250€ u walk out with making the tax value 1838€

While in SA, your tax would be on the full value at 45% (no increment to simplify example) ie 3375€

So you would owe SARS 1537€ as that NL tax would be the less by this amount. So instead of 5562€ u get 4023€ which is sucks.

There are complication here as
1. Does the tax rebate count as tax? Ie the upfront discount
2. What exchange rate is used and at what rate?
3. Some countries have NHI, Pension, UIF systems which are also deducted post tax.. these are mandatory charges which u don’t get in SA so should this be deductible?
 

cguy

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Not how it will work.. basically say in this hypothetical EU country you earn 7500€ (R122k) / month.

Now in Netherlands as an example, they have a 30% tax discount so your tax is on 5250€. Not sure what tax rate there is but let’s make this easy and say no increment.. then assume tax is 35%.. so 3412€ + 2250€ u walk out with making the tax value 1838€

While in SA, your tax would be on the full value at 45% (no increment to simplify example) ie 3375€

So you would owe SARS 1537€ as that NL tax would be the less by this amount. So instead of 5562€ u get 4023€ which is sucks.

There are complication here as
1. Does the tax rebate count as tax? Ie the upfront discount
2. What exchange rate is used and at what rate?
3. Some countries have NHI, Pension, UIF systems which are also deducted post tax.. these are mandatory charges which u don’t get in SA so should this be deductible?

Also, the R1m threshold also has to be met before any taxation. It only applies to SA tax residents. It applies to non-citizens too. Your employer won’t be forced to deduct it. It’s quite amazing just how poorly JT understands it.
 

krycor

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Also, the R1m threshold also has to be met before any taxation. It only applies to SA tax residents. It applies to non-citizens too. Your employer won’t be forced to deduct it. It’s quite amazing just how poorly JT understands it.

I think the point is that it's best to financially immigrate where possible.. but also to keep in mind that asset/capital accumulation -should- be considered as this is impacted on exit.

While it's not outight double taxation but rather tax normalisation to origin country.. it places the emigrating citizen at significant disadvantages should the tax level be different without considering the Cost of Life difference between the two countries. i.e. Big Mac index so million rand salary in SA is a lot vs 100k USD salary as the housing, food, transit and medical bills are vastly different.

2ndly there is a hidden tax too. i.e. CTC in SA is a bit unique as we use this measure as barometer of income where in other countries they still have a "cash" income value which is taxed and then fringe/company paid benefits which may/not be directly taxed to employee. Thus in the above example there could be 500-1000€ benefits which are paid for /taxed to employer.. <-- under SA tax laws this needs to be declared too.
 

Markd

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It’s not an issue. More for people who work in one country while their family resides in SA. It’s an especially big issue if the foreign country has low/no taxation.

So that thing that gets me is that there is only ONE article I've read out of dozens that even bothers to highlight a DTA agreement being an exemption to the change. It's basically inciting fear in absolutely everyone, and I think in general making a mountain out of a molehill?

SO go to the SARS website, look up the DTA's, and see if the country you live in/desire to live in has an agreement, and if so, read it and never worry about this again.

The real issue as you say is if you are living in a tax free area with no tax agreement- for those people this is an issue. Likewise for people who travel from country to country working etc.
 

cguy

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So that thing that gets me is that there is only ONE article I've read out of dozens that even bothers to highlight a DTA agreement being an exemption to the change. It's basically inciting fear in absolutely everyone, and I think in general making a mountain out of a molehill?

SO go to the SARS website, look up the DTA's, and see if the country you live in/desire to live in has an agreement, and if so, read it and never worry about this again.

The real issue as you say is if you are living in a tax free area with no tax agreement- for those people this is an issue. Likewise for people who travel from country to country working etc.

The new legislation only applies to Tax Residents, so if you are not one, DTAs don’t even matter.
 

Scooby_Doo

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That is exactly it. If you keep your citizenship this type of daylight robbery will be forced upon your employer to strip from your salary to appease international tax laws if they adhere to it. Some countries play ball, some don't.

So the SA government is telling every ex pat to either get stripped of enough money to force them to come back to SA or be poor as a unwashed dildo overseas or on the other hand force expats to renounce their citizenship permanently.

There is no other sense to this tax law than that. If you live in any reasonable country you might be paying 30-60% tax depending where in the world and your income bracket and then to pay an additional up to 45% on whatever is left is insane.

Imagine somewhere in european country that tax 50% and you have a good job of earning around 10000 euro a month. Now you pay 50% of that to the country and take home 5000 euro but wait now the SA government want a 45% slice of that 5000euro and suddenly you went from a rather well off person in europe to someone just shy of living on the street with 2500euro remaining after the doubletax.

That example you used is nonsense, that is not what would happen.

A real example would be

You are earning the equivalent of R2mill in dollars, your tax rate in the country that you are working is at 41%. You will therefore be liable for 4% difference (41% vs SA 45%) for the money earned over R1million.

The issue here is that most first world countries R1 million is not really a lot and you will be in a far lower tax bracket when compared to SA.
 

Pixies

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So what are you peeps doing with your SA pension funds when you emigrate?
 

Markd

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The new legislation only applies to Tax Residents, so if you are not one, DTAs don’t even matter.
so tax resident as in ordinarily tax resident - i.e. outside of the country for more than 183 days of the year (IIRC)? I wasn't sure if this legislation was changing that or not to blanket it irrespective of being 'ordinarily resident'?
 

John Tempus

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That example you used is nonsense, that is not what would happen.

A real example would be

You are earning the equivalent of R2mill in dollars, your tax rate in the country that you are working is at 41%. You will therefore be liable for 4% difference (41% vs SA 45%) for the money earned over R1million.

The issue here is that most first world countries R1 million is not really a lot and you will be in a far lower tax bracket when compared to SA.

Apparently we are all reading a different article or you guys seem to think that the expat tax law will consider the international tax first and then only apply the difference to make up for the 45% expat tax law. I would love to find out why you think that would be the case.

The SA government want their 45% (or up to 45%) of the expat income over R1 million (this seems to be the only caveat in the article), why do you think the expat tax law gives a damn if you already pay 41% overseas and then only will charge you the 4% difference ?

It states right in the article without the following so again how in the world do you read the following in context and come to the conclusion they will only take you the difference ?

"It states that South African tax residents abroad will be required to pay tax to South Africa of up to 45% of their foreign employment income, where it exceeds the R1 million threshold."

My earlier example stated someone earning 10000euro a month before any tax in whatever country they now live and work. Thats 120000euro a year or just shy of R2million a year. This new tax law will screw you on at 45% on everything above the R1million mark which is 50% of your yearly salary as it is in this example.

Sure it seems that if you are a pisspoor earner overseas taking home under R1million a year worth this new law might not affect you or it is not made clear in the article how it would affect the lower earners.
 
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