South Africa’s National Treasury’s proposal to double-tax SA expats abroad has increased the focus and interest on financial emigration. Financial emigration is a formal process whereby the South African Reserve Bank (SARB) changes an SA expat’s status from resident to non-resident for tax and exchange control purposes. This change does not require you to give up your citizenship or your passport or sell your property. It is merely a formality giving legal certainty to your non-resident status.
Recently proposed SA tax changes target expats
Until very recently SA expats were allowed to pay tax in the country they were working in, if they were working outside South Africa’s borders for more than 183 days. However the National Treasury has stated this exemption has been abused and created the opportunity for South Africans to not pay any tax at all, in particular those expats living in low or no tax jurisdictions like the UAE.
As a result the Treasury has issued a proposal, that has been confirmed in Parliament on the 14th of September 2017, that only allows the first R1 million of foreign remuneration to be exempt from tax in South Africa, if the individual is outside the country for more than 183 days as well as a continuous period of longer than 60 days during a 12-month period. This will take effect from March 2020.
The advantages of financial emigration
South African tax residents who live abroad are required to declare their worldwide income to SARS and are subject to South African tax laws. If you choose to financially emigrate, this changes and you may not be liable to pay any South African tax on your worldwide income. Not surprisingly, the proposed change in taxation of foreign income earned by South African tax residents has resulted in a lot more interest in the financial emigration process – particularly when it comes to high earning expats who feel the R1 million exemption is not enough to cover their high cost of living.
How to financially emigrate
With thousands of clients living all over the world, FinGlobal is regarded as a leading migration company and regularly assists with South Africans financial emigration. In order to financially emigrate your tax affairs must be in order and up-to-date and, for exchange control purposes, your South African bank account will become a blocked rand account which is subject to regulatory restrictions. Your remaining South African-based assets and transactions from this account will be controlled by the bank holding your blocked account. As a financial emigrant you may transfer offshore:
- The proceeds of your retirement annuity, even before the age of 55, which are then free to use as you please
- South African source inheritance
- The proceeds of assets declared in your emigration application
- Passive income i.e. rent, dividends, director’s fees, salary for services rendered in South Africa and income from discretionary or vesting trusts
- Proceeds from a third party life policy
If you’re thinking of moving abroad and would like to financially emigrate, contact FinGlobal for more information about how to make the move and unlock your wealth in your new home.