Emigration from South Africa
To leave or not to leave
That is the question! Do you have to emigrate if you leave South Africa (SA)? What are the financial consequences if you do not emigrate but leave SA? Obviously, it is a personal choice to leave the country, but it affects not only you but your family and the businesses you may leave behind.
What is emigration?
It is the formal process of terminating your residency in a particular country to reside in another country. For clarification, immigration is the flipside of the coin and is the formal process that takes place in the country you go to. This article covers emigration FROM SA.
The Process of Emigration
To a great extent, the process of emigrating involves your tax affairs, and it is important to establish where you are tax resident. In SA, there are two ways in which you can be considered tax resident. You can be:
- Ordinarily resident; OR
- physically present.
Ordinary residence is not defined in the income tax act but is ‘defined’ by case law and considers your particular circumstances – where is your permanent home/place of abode, where does your family live, where do you return to after your international wanderings, where do you work. It is not based on the number of days you are in the country.
The physical presence test takes into account the following;
You are present in SA for:
- More than 91 days (in aggregate) during the year of tax assessment AND
- More than 91 days (in aggregate) in each of the preceding five years AND
- More than 915 days (in aggregate) during those five preceding assessment years.
If you meet either of the above criteria, the SA Revenue Service (SARS) will assume you are a SA tax resident UNLESS you are considered exclusively resident of another country in terms of a double tax agreement (DTA) between SA and the country you move to.
SARS could also consider you a SA resident temporarily abroad, which can subject you to SA tax. Often, South Africans leave SA (especially young adults who go and work offshore after studying) and do nothing about formally leaving, i.e., they do not emigrate. This can lead to confusion and murky grey areas, which is important to avoid unless you intend to be an SA resident temporarily abroad.
Being a SA tax resident means you are taxed on your worldwide income – if you remain a resident unintentionally, you could be subject to SA tax on investments you start accumulating offshore.
Therefore, if you have no intention of returning to SA, it is important that you emigrate if necessary!
Understanding whether a DTA may apply to you is also important. Why is this important? One of the functions of these agreements is to ensure that you are not subject to double tax. If you move to a place with no DTA, you could be subject to double taxation. If it is unclear where you are a tax resident, the DTA grants the relevant authorities permission to determine where you are resident. You may have heard the term ‘tie-breaker clause’ – based on specific aspects such as your property ownership, your centre of vital interests, your place of abode, your citizenship etc., the contracting states of the DTA will determine where you are a resident. We believe it would be better for you to determine that, not them!
Once you decide to emigrate, a process must be followed. Up until 2021, the process was controlled by the SA Reserve Bank (SARB), but this function has now been allocated to SARS. It has taken SARS some time to refine the process, and it is now becoming more efficient. Basically, you apply to SARS to become a non-resident for tax purposes, and once that is done, you are considered to have emigrated.
This seems simple enough, but we strongly recommend you use an expert to emigrate you. Dealing with SARS has its challenges, and it is better to entrust the process to someone with contacts at SARS who can deal with any curve balls that may come your way.
We have kept this article high-level, simple and general, but it can become complicated in practice. Where we are dealing with clients who have left SA but not emigrated, it is causing more complications than necessary on distributions from trusts, family members transferring money to offshore family, clients who have one foot in SA and one in another country, family inheriting from SA deceased estates and their funds being blocked etc. To avoid these complications, if you have left SA permanently, please emigrate if you have not done so already!
Please contact Di Haiden or Kate Trollip to discuss if you wish to learn more about what applies to you – experience has taught us that it is essential to understand your specific circumstances; there is no one-size-fits-all approach.
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