Do I need to “financially” emigrate, to avoid having to pay tax on my foreign employment income from March 2020?
There is a big concern amongst South African nationals working abroad ahead of the change in legislation coming into effect on 1 March 2020. Many are scrambling to their bankers to financially emigrate (emigration for purposes of exchange control) to avoid having to pay more tax to the South African Revenue Service (SARS).
Is this, however, a necessary plan of action?
The change in legislation is aimed at individual taxpayers who are still tax residents in South Africa and are working abroad temporarily.
The change in legislation will result in their foreign employment income being subject to tax in South Africa, with the exception of the first R1million being exempt from tax.
Currently, the foreign employment income earned by South African tax residents are fully exempt from tax in South Africa provided they meet certain requirements.
What is not always obvious, is that the amendment to the legislation coming into effect on 1March2020 only effects income received as a result of employment.
This amendment does not affect you if -
- you are an independent contractor working abroad; or
- where you earn foreign investment income; or
- you are no longer a resident of South Africa for tax purposes
Many South African nationals working abroad may already be regarded as non-residents for tax purposes, even though a formal declaration was never made to SARS. South African nationals should be mindful that breaking tax residency in South Africa may result in an exit capital gains tax.
A distinction needs to be made between breaking tax residency (via SARS) and financially emigrating by placing your emigration on record from an exchange control perspective (via the South African Reserve Bank (SARB)).
• Breaking tax residency results in you being regarded as a non-resident for tax purposes;
• Financially emigrating via the SARB results in you being regarded as an immigrant, but that will not necessarily change your tax status with SARS.
Based on the above intricacies, before taking steps to formalise your financial emigration, we strongly suggest consulting a member of our tax team to obtain professional advice in the determination of your tax status as well as a review of past disclosures.
Sharon Machutchon
Tax Consultant for Forvis Mazars
FAQs
If you’re living abroad and have inherited South African funds, or are the beneficiary of a trust, we can help you transfer these assets. Please note: Financial emigration has been phased out from March 2021.
How much money can I take out of South Africa when immigrating? ›
As long as you can verify the legitimacy of the source of your funds, there is no limit to the amount of money you can move out of South Africa as a non-resident. However, where the amount exceeds the Foreign Capital Allowance of R10 million, you will require prior approval from the South African Reserve Bank.
How to tax emigration from South Africa? ›
It's essential to note that tax emigration does not occur automatically when leaving the country or when no longer meeting tax residency requirements in South Africa. You must formally notify SARS of your intention to cease tax residency, seeking official recognition as a non-resident moving forward.
How many employees does Mazars South Africa have? ›
Mazars is one of the oldest audit firms in South Africa with a presence there since the early 1950s. It has over 1,000 staff, 73 Partners and 25 Directors operating out of 10 offices within South Africa.
Where are wealthy South Africans emigrating to? ›
Many skilled and rich South Africans are relocating to The Netherlands, Canada, Portugal, New Zealand, the United States, the United Kingdom, and Australia. Rex Cowley, director and co-founder of Overseas Trust and Pension (OTAP), said the trend of South Africans seeking new opportunities abroad has increased.
What are the disadvantages of emigration in South Africa? ›
The effects of migration in South Africa include increased stress on housing, political and social tension, increased costs, overcrowding, transmission of disease, and marginalization of migrants into low status and low paid jobs. For Lesotho migrants in South Africa remittances are a major source of national wealth.
What is the 1 million rand discretionary allowance? ›
Single discretionary allowance means the R1 million allowance available to residents (natural persons) 18 years and older per calendar year.
How much money can you transfer out of South Africa per year? ›
How much can I transfer out of South Africa per year? You can transfer a total of R11 million a year using your allowances. Taxpayers over the age of 18 who are South African residents are eligible for the following allowances: R 1 million single discretionary allowance (no tax clearance required from SARS)
Will I be taxed if I receive money from overseas in South Africa? ›
The short answer is yes: foreign income is taxable in South Africa. The South African tax system states that if you're a South African resident (for tax purposes), you will be taxed on all local and foreign income you receive, regardless of where it is paid and where the source of the income is.
What is the 183 day rule in South Africa? ›
The 183 day tax rule includes every calendar day that passes, not just working days. This means that weekends, public holidays, annual leave, sick leave, and off-duty time spent abroad (while in employment) all add up toward meeting the 183-day time requirement.
South African “expat tax” exemption
However: You must have spent more than 183 days outside South Africa in any 12-month period and. During the 183-day period, 60 days must have been spent continuously outside South Africa. You must be an employee earning a salary.
How much money can a non resident take out of South Africa? ›
For non-residents: Remaining R100,000 cash: Non-residents, having ceased tax residency, can remit the remaining cash balance, up to R100,000, abroad on a once-off basis without SARS approval. This facilitates closing bank accounts and deactivating tax numbers.
Is Mazars better than BDO? ›
Compare company reviews, salaries and ratings to find out if BDO or Forvis Mazars, LLP is right for you. BDO is most highly rated for Culture and Forvis Mazars, LLP is most highly rated for Compensation and benefits.
Is Mazars prestigious? ›
Mazars ranked as top tax experts and fiduciary firm 2024.
Is Mazars one of the Big 4? ›
Mid Tier accounting firms – traditionally seen as any firm which is not a Big 4 firm or a small firm. As a rule of thumb, think of the Mid Tier firms as the top 100 UK firms, minus the top 4 firms. The top of the Mid Tier, e.g. BDO, Grant Thornton, RSM, Mazars are very different from the rest of the Mid Tier.
Are South Africans still emigrating? ›
Rising numbers leaving
In 2000, 501 600 South African citizens resided abroad. By 2010, that number had increased to 743,807, and by 2020 — the latest available data from the United Nations Department of Economic and Social Affairs — their numbers had reached 914, 901.
Does South Africa still have self sufficient societies? ›
Currently, South Africa is the only country in Africa to boast food self-sufficiency, as a recent informative report by KPMG revealed. With a robust and productive agricultural sector, the importance on agriculture in modern-day South African cannot be overstated.
Are South Africans over indebted? ›
According to the Financial Sector Outlook Study 2022, more than 50% of South Africans using formal credit services, are over-indebted.
Are expats coming back to South Africa? ›
The great return to their roots
Despite this success, a significant number of South African expats have recently decided to return home, in a move often dubbed reverse emigration.
