Financial emigration from South Africa was historically considered to be only a foreign exchange matter. The main benefit of this process was that you could access your retirement annuity savings before the age of 55 and you could take an increased amount of funds out of the country. Recent amendments to the Income Tax Act means that it may be to your benefit to consider financial emigration even if you don?t have a retirement annuity fund or significant assets.

We discuss these tax amendments below. If you don’t care much for the technical jargon, feel free to skip to the non-technical version further down.

The technical version:

In 2001 a residence-based system of taxation was introduced in South Africa. This meant that South African tax residents were from then on taxed on their worldwide income. Relief was however granted to those South African tax residents employed outside the country and spending more than 183 days during a year outside South Africa. Generally speaking, remuneration received by such persons for services rendered outside South Africa is exempt from tax ? meaning South African tax is not payable on these amounts.

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?.

To address this, the Income Tax Act is changing from 1 March 2020. From this date 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.

It is important to note that this is only applicable to South African tax residents ? which is different from citizenship.

The non-technical version:

If you emigrated from South Africa but never formally notified the Reserve Bank and SARS, there are circumstances under which you could still be liable to pay tax in South Africa on your foreign employment income.

We recommend that you speak to your legal or tax adviser to get clarity on your tax residency. It is better to resolve this situation now, than hoping it would go away and be haunted by it one day if you want to retire in South Africa. National Treasury (which makes the tax laws) recently made the comment that:

?The formalisation of the tax residency status of South African tax residents who left the country many years ago is to be encouraged. South Africans who are no longer tax resident are welcome to return to South Africa in future and there are no barriers from a tax perspective to do so if their tax affairs are in order.?

If you need assistance with this process or to clarify your tax status, you are welcome to contact us for a free discussion.

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.