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Originally Posted On: https://medium.com/@expats/south-africa-expat-tax-bf7b75ba2196

 

The landscape of the South African Expat Tax has undergone significant changes in recent years, making it imperative for expatriates to stay abreast of these developments. This blog post aims to provide a comprehensive overview of the new 2023/2023 tax laws affecting South African tax residents living abroad.

 

One critical change is that financial emigration is no longer recognised under South African law, which could have profound implications for those planning or undergoing this process. We’ll explore this and its potential effects on your foreign income and tax liability.

We will also guide you through the Double Taxation Agreements (DTAs) application process, providing insights into eligibility criteria and the necessary steps involved. We’ll take a closer look at the withdrawal of the SARB system, why it’s happening and what other options may be open in future.

Lastly, we’ll explore how breaking your tax residency status with SARS can trigger Capital Gains Tax — an essential consideration when navigating the complex terrain of South African Expat Tax. Stay tuned as we unravel these intricate aspects.

Understanding the New South African Expat Tax Laws

The tax game for South African expats has changed. Brace yourself for the new tax laws in 2023/2023. These laws greatly impact expats who still call South Africa their tax home. Time to figure out how these changes could affect you and what you can do to dodge any negative consequences.

Overview of the new 2023/2023 tax laws for SA expats

South Africa wants to stay competitive globally and fair within its borders. So, they made some changes to their tax policies. The main change is that the exemption for foreign income is now limited. You’ll be taxed like everyone else if you make more than R1 million (£52k). No more free rides.

Impact on SA expat workers holding a tax residency

Attention high earners. Pilots, engineers, and the like, listen up. If you’re making bank, you might have to pay extra taxes once you cross that R1 million threshold. Time to be savvy and ensure you remain compliant with the law.

Financial Emigration is No Longer Recognized

Breaking news. Financial emigration is no longer a recognized way to escape tax residency in South Africa. Sorry, folks, the party’s over. The SARB has put an end to financial emigration as a means of avoiding tax residency in South Africa, effective from 1st March 2023.

What does it mean that financial emigration is no longer recognized?

So, here’s the deal. You used to be able to declare yourself a non-resident financially and cut ties with the SA Revenue Service (SARS). But not anymore. Even if you remain abroad indefinitely and have no intention to return, SARS will still regard you as a resident for tax purposes. Unless you meet certain criteria outlined in the DTA agreement between the two countries involved. Taxation is a tricky business, my friend.

Implications for those planning or undergoing financial emigration

Attention, future ex-pats. Due diligence is essential for those considering financial emigration to ensure a successful transition. Recent changes in legislation mean you should think twice and seek advice from experts in financial migration. Don’t let unforeseen complications ruin your grand escape plan.

Key Takeaway:

The new South African expat tax laws in 2023/2023 have removed the exemption for foreign income, meaning that high-earning expats will now be subject to additional taxes if they earn more than R1 million. Financial emigration is no longer recognized as a way to escape tax residency in South Africa, so those planning or undergoing this process should seek expert advice and consider the implications of these changes.

Financial Emigration: No Longer a Tax Break

The South African Reserve Bank (SARB) has pulled the plug on financial emigration as a way to dodge taxes. Starting from March 1st, 2023, this sneaky loophole is no longer recognized. Say goodbye to tax-free living for South African expats.

So, what does this mean?

Before this change, financial emigration allowed South Africans abroad to cut ties with their tax obligations back home. They could sip margaritas on the beach without worrying about paying taxes on their global income. But now, they’ll have to prove their non-residency status in other ways. Ouch.

Don’t panic just yet for those already in the process or thinking about it. You’re in the clear if you completed your financial emigration before March 1st. But going forward, you’ll have to jump through more hoops set by the South African Revenue Service (SARS). Good luck.

Watch out for these implications.

With financial emigration out of the picture, there are a few things to keep in mind:

• Tax Liability: You’re safe if you escaped taxes through financial emigration before the deadline. But now, you’ll have to meet stricter requirements from SARS — time to brush up on your tax knowledge.
• Risk Management: Without this tax loophole, you’re at a higher risk of messing up your tax affairs. Don’t let yourself be liable for fines. Stay informed.
• Estate Planning: Changes in tax residency status can affect your estate planning strategies. Ensure you understand the laws in different jurisdictions where your assets are held. It’s all about playing the game.

These changes might make your head spin, so it’s wise to seek advice from tax professionals who specialize in international matters. Greet success and capitalise on your resources in this ever-evolving environment. Cheers.

Key Takeaway:

Financial emigration, a loophole that allowed South African expats to avoid paying taxes on their global income, has been abolished by the South African Reserve Bank. Expats will now have to prove their non-residency status in other ways and may face stricter tax requirements from the South African Revenue Service. Expats need to stay informed about these changes and seek advice from tax professionals specializing in international matters to ensure compliance with tax laws.

Application Process for Double Taxation Agreement (DTA)

The South African tax law has provisions to avoid paying tax twice for South Africans living abroad. This is done through the Double Taxation Agreement (DTA), ensuring you don’t get taxed on the same income in two countries. But applying for a DTA can be tricky, so here’s what you need to know.

Eligibility criteria for applying under DTA

To qualify for relief under a DTA, you must meet certain criteria set by SARS and the foreign country where your income comes from. The most important requirement is being considered exclusively tax resident in one of the contracting states.

• According to South African tax law, you must prove you’re a resident.
• Your actual foreign tax liability should match or exceed your theoretical South African tax payable on your foreign employment earnings.
• You must not receive any preferential treatment or special remission rules for paying taxes abroad.

Remember, each treaty partner may have its own specific conditions, so make sure you know them before applying.

Steps to Acquire a foreign country’s tax residency certificate

If you meet the eligibility criteria, getting a certificate from your current country confirming your exclusive residency is crucial. Here’s how:

1. Contact local authorities: Contact relevant bodies like HM Revenue & Customs if you’re in the UK or similar entities elsewhere to get the certification.
2. Gather necessary documents: You’ll likely need proof like utility bills showing your residence address and other identification papers.
3. Apply: Submit all the collected materials and completed forms the authority provided. Remember, each nation has different procedures.

This process may seem daunting, but understanding it can save you from potential double-tax burdens. Stay informed about expat taxation changes, especially the recent reforms introduced into South Africa’s Income Tax Act.

A warning, however — even if you are identified as a non-resident for tax purposes in South Africa, there may still be duties to fulfil back home. Worldwide income remains liable depending on individual circumstances, so consult professionals to ensure compliance and maximize savings.

Key Takeaway:

To avoid paying tax twice, South African expats can apply for the Double Taxation Agreement (DTA), which ensures they are not taxed on the same income in two different countries. However, eligibility criteria need to be met and a process to acquire a foreign country’s tax residency certificate. Understanding these requirements and consulting professionals to ensure compliance and maximize savings is important.

Phasing Out of SARB Process & Its Effects

The National Treasury recently declared its intention to phase out the South African Reserve Bank (SARB) process of financial emigration, causing a stir among expats in South Africa. This decision came into effect on March 1st, 2023 and holds significant implications for future processes related to tax residency.

Reasons behind phasing out the SARB process

The government wants to make things simpler and less confusing, so they’re ditching the whole SARB process. No more proving you won’t return to South Africa with employment contracts and property sales. They just want to collect taxes from those who still have ties here. Fair enough.

Future alternatives after phasing out

So, what’s next for expats? Well, there are a few options to consider:

• Tax Residency Test: You can take a test to determine your tax residency based on how many days you spend in or out of South Africa over five years. Remember, even if you pass the test, it doesn’t necessarily exempt you from paying taxes — just where they’ll be removed.
• Cessation of Tax Residency: Another option is formally ceasing your tax residency status by applying to SARS. But be warned, and this could trigger some hefty capital gains taxes. Ouch.
• Dual Tax Agreements (DTAs): Lastly, you could take advantage of existing DTAs between South Africa and the country where you earn income. These agreements are all about avoiding double taxation. Nobody wants to pay taxes twice.

Plan and get expert advice to dodge any tax troubles. Don’t get caught in a tax tangle.

Breaking Your Tax Residency Status with SARS — Capital Gains Tax Triggered

Brace yourself for a capital gains tax surprise.

The Concept of Capital Gains Tax for Expats

You trigger a capital gain or loss when you sell assets like property or shares. For South African expats breaking their tax residency status, this means facing an exit charge — a fancy term for capital gains tax (CGT).

Basically, SARS assumes you sold all your assets at market value the day before you stopped being a resident. And guess what? You’ll be taxed accordingly. But hey, don’t worry; your bling and wheels are CGT-free.

The Impact of Breaking Your SARS Tax Residency Status

Breaking up with SARS can be costly. If you possess a lot of property in SA and choose to become an overseas taxpayer, be ready to pay hefty taxes when you move abroad.

Your CGT bill could make your eyes water depending on how long you’ve had those assets and how much they’ve appreciated. We’re talking hundreds of thousands, maybe even millions, of Rands.

Navigating Through The Complexities Of CGT As An Expat

Don’t panic. Here are three things to keep in mind:

• Evaluate Assets: Before breaking up with SARS, look at all your assets worldwide. Make sure it makes financial sense.
• Tax Planning: Plan. Understand your future income and avoid any nasty surprises down the line.
• Professional Guidance: Don’t go it alone. Get advice from experts who know their way around UK and SA tax laws. They’ll help you navigate this complex terrain and avoid any costly mistakes.

Making Informed Decisions About Your Financial Future Abroad

Breaking up with SARS is a big deal, so do your homework. Research different scenarios and consider your life goals. And remember, you’re not alone. Online platforms like Expatriates Stack Exchange offer expert guidance to help you make smart decisions about your financial future abroad.

Key Takeaway:

When South African expats break their tax residency status with SARS, they may face a surprise capital gains tax bill. This means that if they sell assets like property or shares, they will be taxed on the capital gain made from those sales. Expats need to evaluate their assets, plan for future income, and seek professional guidance to navigate the complexities of CGT as an expat.

FAQs about South African Expat Tax

What is the new expat tax law in South Africa?

The new expat tax law introduced by SARS states that South African residents working abroad for more than 183 days must pay an income tax on foreign earnings exceeding R1.25 million.

Do expats pay tax in South Africa?

Yes, under certain conditions, expats must pay taxes in South Africa if they meet residency criteria and exceed a specific earning threshold.

Does South Africa have a double taxation agreement with the US?

South Africa does have a Double Taxation Agreement (DTA), which aims to prevent taxpayers from being taxed twice on their earned income.

What is exit tax when emigrating from SA?

‘Exit Tax’, also known as Capital Gains Tax (CGT), applies when you cease your tax residency status with SARS. It’s considered as selling all your assets before leaving SA.

Conclusion

In conclusion, the new South African Expat Tax laws have significant implications for expats and international workers.

Financial emigration is no longer recognized, meaning individuals must explore alternative options for managing their tax residency status.

Applying under a Double Taxation Agreement (DTA) and acquiring a foreign country’s tax residency certificate are important steps in navigating these changes.

Additionally, the phasing out of the SARB process requires individuals to consider future alternatives.

It’s crucial to understand that breaking your tax residency status with SARS can trigger capital gains tax obligations.