The Financial Emigration process changed on 1 March 2021, but what happens once financially emigrating? Let’s answer your questions regarding exit tax in South Africa and the implications after leaving the country.
Tax emigration and financial emigration are often confused to be the same. Financial emigration is that of leaving the country to live abroad and transferring all your financial assets out of the country. This process does not mean an individual is not considered a tax resident of South Africa. It is also important to note that changing your tax residency does not imply that you can suddenly financially emigrate and may not even have an impact on the financial emigration process.
SARS studies the time spent in South Africa as well as the assets held in your name – should you financially emigrate this process will provide evidence for the tax emigration process.
SARS then requires you to declare your tax status to decide how you should be taxed. A South African tax resident pays tax based on worldwide income and asset based whereas a non-tax resident will only be taxed on South African based income and asset base.
Exit Tax is the final tax charged on one’s assets before leaving South Africa and is also referred to as Capital Gains Tax. Exit tax is due the day of or the day before becoming a non-tax resident of South Africa, this includes discarding of certain assets such as foreign fixed property, shares, unit trusts and trust funds. This does not apply to South African fixed property in the taxpayer’s name, cash, personal assets nor retirement interests held in pension, provident and retirement annuity funds.
To be declared a non-tax resident, you need to undergo an ordinarily resident test or a physical presence test. This proves whether you have a permanent residence to return to or how many days at a time you are in the country. Once declared a non-tax resident, South Africans will no longer be charged worldwide income tax in South Africa – they will only be charged tax on SA based income. Should a taxpayer not submit Exit Tax, they can be charged with a penalty of up to 200%.
The emigration process can be backdated as far back as when you first leave the country.
Our team at RandTangle can walk you through the tax emigration process and deal with all the necessary parties so you can emigrate with ease. Contact us today at firstname.lastname@example.org