If you have been following the latest development on tax emigration outlined in the points below, those should not just encourage South Africans abroad to look to emigrate (if they qualify), but also to do this in the near future, using experienced tax professionals.
the changes in the Emigration process,
the changes to screening bodies for emigration,
the additional information required by SARS, with a revived interest in Income Tax (and not just CGT)
The changes in the emigration process are many, but most significant is the phase-in of an alliance of more than 45 countries – targeted for 1 March 2021. This includes the ‘proposed sharing of information’. Nobody knows what will be shared between countries and how far back this sharing will go. It is suspected that cash in banks, shares held in financial institutions and possibly fixed property will be shared. If these assets are in the taxpayer’s name, the chances are that they will become an area of interest. More so, the threat of double taxation will arise…
Further the Reserve Bank has a duty to govern exchange control. In as much as their involvement in the process may be changing, the alliance information shared – could well become something of interest to them. How did a taxpayer living abroad accumulate such wealth without transferring it though the correct channels?. The Reserve Bank also has the ability to penalise transgressors and some feel their sting is worse than SARS.
The changes to screening bodies relates to the roles of each institution. Those involved include the banks, SARS, the South African Reserve Bank and the Mutuals in the retirement industry. They all follow separate rules, but change is in the air and with it – not only are the roles being revised, but their own rules and policies.
The additional information required by SARS, suggests an interest in income for the 12 months preceding emigration. Previously tax emigration triggered a deemed sale of worldwide assets and a Capital Gains Tax (CGT) event. This means that should the taxpayer emigrating have assets (and some were excluded), then such worldwide assets were deemed to be sold on the date of emigrations and CGT raised on these at the individuals applicable CGT rate.
In as much as tax compliance is required for all taxes before emigration, most taxpayers who have lived abroad for many years, and embarking on tax emigration would declare zero returns for their absence, get compliance and tax emigrate. There was no need to furnish SARS with 12 months of bank statements preceding emigration.
If used smartly, a review of 12 months of bank statements preceding emigration – can result in interest and correspondence with SARS. This is a new request seen recently and we anticipate keen interest from SARS, in these tough times when tax revenue (through taxes and penalties and interest) is sorely needed, to service the government debts from Covid.
It is to be expected that the strength of the alliance is to be felt, when the alliance partner comes to your doorstep, on behalf of SARS. In some countries, tax disputes can be grounds for compromise of visas – with a default return to port of origin - being South Africa.
If you do not have experience in tax emigration, contacts in the process and are attempting this on your own – just words of caution. Notwithstanding taxes and double taxation – penalties and interest from SARS can be material, interest from the South African Reserve Bank around wealth transfer disputes can make life tougher. Finally, the alliance partners in most countries, especially first world, will probably respond harshly to tax non-compliance.
For further details or more information on the tax emigration process please contact our office.
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