I DIDN’T EMIGRATE CORRECTLY - TAX EMIGRATION DEMYSTIFIED

There are two scenarios to exit South Africa as a tax resident:

1. In case of death, and be subjected to estate duty, and

2. ‘Cease to be a resident’ and be subjected to a ‘wealth tax’.

Many South Africans leave the country and suspect that the system just adjusts. They are unaware of the fact that there is an exit tax event. Further, until they have been subjected to it, they have not formally EMIGRATED.

Ask yourself the question – have you been subjected to a wealth tax?

In addition, emigration often requires/ includes:

· the proof of the ability to live abroad – (more than a 3-month visas);

· the changing of a South African bank account to non-resident or closure;

· the dealing with retirement products;

· the dealing with property or estates left to persons who live abroad;

· the distributions from a South African trust to residents living abroad;

· other

All of the above are not addressed when one gets on a plane and leaves. Support documentation needs to be submitted to the relevant authorities. More so, each emigration is unique.

Implications of not exiting correctly:

1. Worldwide collaboration through the Tax Authority Alliances that have formed and continue to get stronger. A partner in the Alliance can come and knock on your door on behalf of SARS – whereever you may be living in the world.

2. Repatriation of money out of South Africa (be it your assets left behind, your retirement products or the estate of a parent), will not be allowed until you meet the banks requirements. Top of the requirement list is to provide the bank with a tax emigration pin.

Confusion

There was a period when the income tax returns included a question if one ceased to be resident during that tax year… This question created the impression that an affirmative answer would notify SARS and hence emigration was complete.

All this answer did, was to trigger a pro rata calculation of days in South Africa for which you would get your primary rebate. It did NOT formally link to tax emigration and satisfy the requirements to successfully emigrate. Further, income tax returns often do not include balance sheets. In these cases, there was no way that SARS could determine your wealth on exit.

This article was written for those who simply left the country and assumed all would be automatically ‘settled’…

Not the case…