I have written a few articles in regards to the South African wealth tax, you will find them throughout the articles on the website here.
A country, that not only has had its political turmoil but more recently been hit by Covid which has hit the economy harder. Therefore the government is looking for new ways to try and regain some of the lost income. Sure, most governments are in this tough situation right now trying to combine keeping the economy going while paying off an increased deposit due to the pandemic.
Although, South Africa, has taken more radical steps than the other countries and it has proposed a wealth tax that is looking to tax a modest wealth of 3.82 Million ZAR. As stated in the videos, this is not a large amount of money to have in your net worth, this includes, your house, any artwork and any money in the bank.
Personally, I feel that other (better) ways could be implemented but will not go into politics.
So, want to go over briefly, how this effects RSA expats and what can be reviewed as an expat.
What do expats get taxed?
For expats though, it requires that any South African abroad are taxed at 45%, on anything over 1.25 Million ZAR. This might be a bit, however, for the average expat in a 2019 study by HSBC earning 99,000 GBP (well over the RSA tax band) with significantly more in places such as Tokyo, Mumbai, Shanghai, Singapore it can impact a lot of RSA expats.
Although, as of March 1st 2020, any expat earning over this level of 1.25 ZAR will be taxed at the RSA in accordance with the normal RSA tax tables.
Double Taxation Agreements
Double tax agreements can work as an expat that if you are in a low tax income such as the middle east it is unlikely that RSA has a DTA. See below for the full list.
https://www.sars.gov.za/Legal/International-Treaties-Agreements/Pages/default.aspx
You must apply on an annual basis and to meet the requirement you must declare your foreign income and claim an exemption in RSA. This will then be tested by audit and need clarification of tax certificate from the tax jurisdiction to state that the applicant is a tax resident of the foreign jurisdiction.
It is worth noting that this is an annual occurrence that will need to take place. With proving to SARS you are a non tax resident in DTA country with the RSA.
What can you do as an RSA expat?
RSA expats can go down the formal process of declaring themself a non-resident for tax purposes in RSA. This ensures that under South African requirements, under the income tax act to ensure classification as a non-resident in accordance with RSA tax residency tests.
Although, this alone doesn’t mean you automatically become a non-tax resident it does play a vital part.
You will need to apply with an application from the South African Reserve Bank to record the formal emigration.
One note is that this is for people that have a full intention of residing outside of RSA with clear intentions not if you intend to go back at all.
To determine whether a residence RSA imposes two tests:
Physical Residency test:
This states that in the year to date when tested 91 days in aggregate of the year when under assessment and 91 days in aggregate in each of the 5 years after the year of assessment. And 915 days aggregate 5 years after the assessment.
Ordinary Residence test:
This can get quite complex so have attached some links, but in short suggests that if you have a settled place of residence in RSA, where they stay most often, nature of business, family, an association of any clubs etc
https://www.sataxguide.co.za/ordinary-residence-physical-presence-test/
South African Pensions
South African Expats that have a pension can access it at the age of 55 but under the new laws drafted on 1st March 2021 by the RSA treasury. It states that retirement saving could be withdrawn prior to retirement after 3 years from the date that you break your tax residency. Requiring expats to prove non-residency for 3 years under the RSA residency test from 1st March 2021 before allowed to withdraw the funds.
Conclusion
As an RSA expat you need to take the time to review your situation and under your personal circumstances in relation to your finances under what action might be deemed appropriate for you.
If you want to review the new tax rules and what you can do to reduce the amount of tax you need to pay, please email me at info@investmentsforexpats.com
