Tax increase - will you emigrate?

[koffiejunkie]

This is a really good point - do you know what would put you out of SARS reach?

A lot of people think simply doing financial immigration is the fix, but that's only part of the story. From what I understand, SARS uses a number of factors - six or seven but I don't remember them all - to determine if you are resident for tax purposes. One is where your assets are held. Another is where your income is derived. Another is where you spend your time[*] - if you spend more than a certain number of days in SA, you are likely resident for tax purposes. There are a few more, but as I say I don't remember all of them. Anyway, all of this is taken to account and the determination is made at SARS' discretion. Being FE doesn't guarantee you're not considered resident. Financial Emmigration is a Reserve Bank process, nothing much to do with SARS.

[*] As I understand it, the main reason the law was introduced was to go after South Africans doing 6-months on, 6-months off contracting in low- or no-tax places like Dubai, and spend the remainder of the year in SA. Often they are people with a spouse and children here, so they're technically living in SA, and just working away for extended periods. This, to me seems reasonable, but as usual the law is overly broad and vague so it catches a lot of people like me who work and live permanently in a place with low tax and ass-impalingly expensive rent. My rent for a 1-bedroom flat in a fairly old building is double my teacher-mother's salary in SA. It's simply not comparable and not really comprehensible to anyone not living and earning here. Sure, I earn decent but paying 45% to ZA would completely wipe out any advantage for me to be here. In fact, it might make it completely unaffordable.

 

[cguy]

A lot of people think simply doing financial immigration is the fix, but that's only part of the story. From what I understand, SARS uses a number of factors - six or seven but I don't remember them all - to determine if you are resident for tax purposes. One is where your assets are held. Another is where your income is derived. Another is where you spend your time[*] - if you spend more than a certain number of days in SA, you are likely resident for tax purposes. There are a few more, but as I say I don't remember all of them. Anyway, all of this is taken to account and the determination is made at SARS' discretion. Being FE doesn't guarantee you're not considered resident. Financial Emmigration is a Reserve Bank process, nothing much to do with SARS.

[*] As I understand it, the main reason the law was introduced was to go after South Africans doing 6-months on, 6-months off contracting in low- or no-tax places like Dubai, and spend the remainder of the year in SA. Often they are people with a spouse and children here, so they're technically living in SA, and just working away for extended periods. This, to me seems reasonable, but as usual the law is overly broad and vague so it catches a lot of people like me who work and live permanently in a place with low tax and ass-impalingly expensive rent. My rent for a 1-bedroom flat in a fairly old building is double my teacher-mother's salary in SA. It's simply not comparable and not really comprehensible to anyone not living and earning here. Sure, I earn decent but paying 45% to ZA would completely wipe out any advantage for me to be here. In fact, it might make it completely unaffordable.

I think that the exclusion amount (R1.25m IIRC), is supposed to be a token towards the increased living expenses elsewhere. Still, my take on it, is that it isn't a good idea from the SARS perspective - well earning professionals that are already mostly abroad are probably pretty likely to make an effort to just become non-residents completely (taking talent, and capital out of the country). Even if some do move to SA (I am sure some would), the earning potential will drop, and the foreign capital that would have been spent in the company will be mostly lost.

 

[koffiejunkie]

I think that the exclusion amount (R1.25m IIRC), is supposed to be a token towards the increased living expenses elsewhere.

That's my understanding too, but it's a bit of a thumbsuck. And who in their right mind specifies a foreign curreny cumber in an unstable currency? Why not use USD or at least GBP?

Still, my take on it, is that it isn't a good idea from the SARS perspective - well earning professionals that are already mostly abroad are probably pretty likely to make an effort to just become non-residents completely (taking talent, and capital out of the country). Even if some do move to SA (I am sure some would), the earning potential will drop, and the foreign capital that would have been spent in the company will be mostly lost.

Exactly. I have just reached the point where I can afford to start investing in assets in SA and start building my SA empire when this came around. In fact, I was seriously considering moving back full time. As I said earlier, I'm sympathetic to the law, if I understand the purpose correctly. And I don't have a problem with paying income tax in SA on income generated in SA. But laying claim to foreign income while I live aborad full time is forcing my hand.

 

[Affieplaas]

If you are no longer an ordinary resident (the courts have interpreted the concept to mean the country to which a person would naturally and as a matter of course return from his/her wanderings) of SA, this will not apply to you. So if you have a dual passport, permanent residency or potentially even a long term work permit somewhere else it means that you have no need to return to SA.

 

[Cius]

Mostly trapped here. Too old already and family would be medically barred from going anywhere I want to go.

Things that would force me to leave regardless to wherever is better and will take us:
1. Hyperinflation
2. Don't have a reasonable level of safety
3. Can't get decent education for my kids
4. Medical system collapses
5. JuJu becomes president

Otherwise, hoping the majority wakes up and starts voting smarter than we have seen. The ANC cannot fix this. They broke it and any attempt to fix anything generally makes things worse, not better.

 

[pinball wizard]

I'm getting the **** out of here. Zimbabwe here I come.

Now to go dust of that old Rhodesian passport.

 

[^^vampire^^]

Bro already out - gonna follow with the folks as soon as makes sense. within the next year.

@Tander is right. long before this tax increase plans were already in place.

TBH it isnt even because of the tax many countries have high tax rates in the highest bracket:
Netherlands - 49.5%
Germany - 47.47%
Portugal - 53%
Canada - 54%

but what is done with the tax revenue and personal safety is the main reason. would gladly pay more tax if public transport worked for all and i felt safe to walk around.

The problem with SA's tax rate is that you are taxed double for everything.

Income tax is supposed go to:
* police - you have to pay for armed response
* hospitals - you have to pay for medical aid
* fire service - better hope there is a private service in your area you can subscribe to
* schools - better pay those fees yourself, public or private
* roads - enjoy your illegal tolling systems
* social security - enjoy your tax from each payer being split amongst 20-30 people

Once you've paid for all the extras (and the other stupid ideas they keep trying to implement like SAA, NHI etc) you're probably in the 60%-70% tax bracket in a nation that is failing miserably and so you're still getting nothing for your hard earned and easily wasted money.

Next month my tax rate will be 29.05%. For that I get:
* Medicare
* Police
* Fire service
* Free public schooling
* Roads
* 9.5% retirement automatically contributed
* Social security benefits - job keeper, job finder, unemployment etc
* Other benefits:
--- neighbours don't understand what armed response is because it's unfathomable
--- working and safe, buses, trams and trains
--- water & electricity where failure to supply for over an hour results in the company paying you
--- option of electricity and gas suppliers with different tarriff options
--- can walk my dogs or just myself at 1am if I want with no risk to myself

Glad that you're leaving SA and anyone else that has the option to. It's no longer a smart option to stick around there.

 

[bro-da]

The problem with SA's tax rate is that you are taxed double for everything.

Income tax is supposed go to:
* police - you have to pay for armed response
* hospitals - you have to pay for medical aid
* fire service - better hope there is a private service in your area you can subscribe to
* schools - better pay those fees yourself, public or private
* roads - enjoy your illegal tolling systems
* social security - enjoy your tax from each payer being split amongst 20-30 people

Once you've paid for all the extras (and the other stupid ideas they keep trying to implement like SAA, NHI etc) you're probably in the 60%-70% tax bracket in a nation that is failing miserably and so you're still getting nothing for your hard earned and easily wasted money.

Next month my tax rate will be 29.05%. For that I get:
* Medicare
* Police
* Fire service
* Free public schooling
* Roads
* 9.5% retirement automatically contributed
* Social security benefits - job keeper, job finder, unemployment etc
* Other benefits:
--- neighbours don't understand what armed response is because it's unfathomable
--- working and safe, buses, trams and trains
--- water & electricity where failure to supply for over an hour results in the company paying you
--- option of electricity and gas suppliers with different tarriff options
--- can walk my dogs or just myself at 1am if I want with no risk to myself

Glad that you're leaving SA and anyone else that has the option to. It's no longer a smart option to stick around there.

Excellent post - thanks for this it really puts it into perspective.

 

[SmartShack]

we need a modern day Robin hood to steal from the politicians and give back to the poor

 

[Barbarian Conan]

More people than expected will actually be pushed over the edge by a tax increase.
I've been trying to emigrate for a while, and 'rona really screwed me.

I want to emigrate for all the reasons already listed, although tax isn't really at the top.
I like money, but 1% - 2% extra wouldn't really do more than annoy me. It's already too much. If I really wanted to stay for some reason, I would regardless of the tax increase. I want to leave regardless of the tax rate as well. A 5% tax cut would not entice me to stay.

I am pretty sure I can still find a way to go somewhere. Probably not this year, but hopefully the next.

 

[TofuMofu]

Budget is in and it's fine...

I don't drink a lot and I don't smoke at all and work from home means petrol increase also doesn't affect me.

Actually getting more out because of the income tax changes

 

[Affieplaas]

I must say that I think Government (or at least Tito) recognizes the risk of a tax revolt. He even alluded to it when he mentioned the suggestions he received from the public.

We only had an 8% sin tax increase and even a 1% decrease in company tax. Government debt is however spiraling out of control and I think Tito hopes that the currently elevated commodity prices will remain for a long time to tip the balance of payment into SA's favour for as long as possible.

I think Cyril and Tito are good okes. For the rest of the ANC, they are lower than snail ****.