Financial emigration vs becoming a non-resident for tax purposes

The tax team at RSM have written a short article on financial emigration vs becoming a non-resident for tax purposes. You can find the original article here.The article highlights a very important point, namely that you can become a non-resident for tax purposes in South Africa without going through the formal process of financial emigration. That is historically also the option that many South Africans exercised. If you stay long enough out of the country you will eventually become non-resident for tax purposes. (Note that this has nothing to do with your formal citizenship status).
A white coffee mug on a wooden table with the word "begin" written on it.
Why then go through the hassle of financial emigration if you have been out of the country for many years? The main reason is that a new tax law is coming into effect on 1 March 2020. Recently, the South African Revenue Service (SARS) realised that many South Africans work in countries with low tax or no income tax. Salaries received by these persons are therefore not taxed in South Africa or the other country. This is called ?double non-taxation?. From 1 March only the first R1 million of remuneration received by South African tax residents working abroad will be exempt from tax. Any amount above that will be taxed in South Africa. If you work in a country where your salary was already taxed, you can claim a foreign tax credit from SARS. You can read our article on the tax changes here.

This change only applies to South African tax residents. We therefore recommend that you contact a professional adviser to establish if this change in legislation might be applicable to you or your family.

As always, please note that any information on this website is prepared for general informational purposes only and is not intended to be relied upon as financial, accounting, tax, or other professional advice. Please refer to your advisers for specific advice.