It was recently reported by FNB Home that nearly one in five properties valued at R2.6 million and above on the market were the result of many homeowners planning to emigrate.
Emigration has been difficult, but not impossible, since the Covid lockdowns were introduced more than a year ago.
On 1 March 2021, South Africans were allowed to financially emigrate and cut all tax ties with the country.
But there are some who are “leaving” but not really leaving. Evidence of this is the fact that while they have a ticket booked through OR Tambo to head off to the UK or US, they still have a property that is unsold in SA.
All this has come to light after SA Revenue Services conducted a number of audits of financial emigres.
This is what Sars requested in one such case:
- Submit 12 months bank statement with all income and a description which reconciles with what was declared to Sars.
- Submit a copy of the tax clearance application and approval for immigration.
- Submit a copy of your residency certificate.
- On the unsold property in South Africa, what is the intention of holding this property?
- Date of departure from OR Tambo airport.
Reabetswe Moloi, attorney at Financial Emigration, a division of Tax Consulting South Africa, says leaving SA does not mean you can forget your relationship with Sars. Many emigrants are planning a permanent break with SA, but others are hedging – they still have family here and they want an escape hole if things don’t go right on the other side. So you better have a very clear idea of your intentions from the outset – are you leaving or maybe coming back?
“No matter where you decide to live, you are still obligated to declare your worldwide income every year to Sars and pay tax on it for so long as you have not formalised your non-tax residency with them,” says Moloi.
In addition, paying tax to a foreign government doesn’t mean you don’t have to settle your Sars bill as well. So you could end up being double taxed.
“However, depending on your situation, you can either reduce your tax burden or do away with it completely, provided you act immediately,” advises Moloi.
What you can do
Writing in Tax Consulting SA, Moloi says emigrants have several options available to them. These depend largely on their intent and their ability to prove it, that is, whether they mean to depart South Africa permanently or to eventually return.
“Never attempt to deceive SARS or your expatriate tax advisor about this because true intentions leave evidence and you will be found out if abusing these provisions,” warns Moloi.
The first option is that, by law, the initial R1.25 million of an expatriate’s annual income is exempt from taxation, provided they are employed. Independent contractors and consultants, and those earning income from assets, like rental property or investments abroad, do not qualify for this exemption. It is important, however, that , you submit a tax return for the year of assessment in question in order to claim and benefit from the exemption.
The second is that you may qualify to pay tax to only one government, provided your destination country has a double tax agreement signed with South Africa. It is better to make sure of this before emigrating.
The third option is formalising your non-tax residency status by way of financial emigration, which allows taxpayers to relieve themselves of their tax burden to SARS in full. This is the most desirable route for anyone intending to remain permanently outside South Africa. However, the process is incredibly complex and needs to be managed carefully to be successful.
Knowing the best option for your situation and how to navigate each path correctly requires the assistance of a tax professional who specialises in expatriate tax matters.
They should also be backed by a strong legal component, that is, attorneys and tax practitioners who are deeply familiar with intricate tax laws. “Having good legal and technical advice on your side gives you an edge when dealing with SARS,” says Moloi.