The tax implications of emigrating (Moneyweb)

[greggle]

An article that may be of interest to some of yous:

http://today.moneyweb.co.za/article?id=802173#.VK95GNKUd1Z

[Hugo2]

Have you read the comments below the article? Not a good article, sorry to say

http://www.moneyweb.co.za/offshore-investing/the-tax-implications-of-emigrating

[SurferMan]

LOL

[Shampoo]

As much as I admire Hugo being the emigration specialist and a master tax consultant with SARS, I must add this.

All JSE stocks that are in property stocks and your assets that are fixed property will be subjected to Exit Tax.

[Hugo2]

Indirect interests in South African fixed property (for example shares held in a property-rich company) will now result in a capital gain in South Africa (the capital gains tax ‘exit charge’) when South African residents – either companies or individuals – emigrate. However, actual direct ownership of fixed property in South Africa will remain outside the exit charge and thus only attract capital gains tax when actually disposed of.

Thanx for the kind words, but I do not agree with the tax facts, sorry!

HUGO WISH TO ADD:

All JSE stocks that are in property stocks and your assets that are [DEEMED] fixed property i.e. a ‘immovable property rich entities’. will be subjected to Exit Tax.

ACTUAL TITLE DEED OWNED IMMOVABLE PROPERTY IS NOT SUBJECT TO THE EXIT CHARGE ON TAX EMIGRATION - SEE BELOW

The revised section 9H of the Income Tax Act (ITA) effectively ensured the exit tax charge is paid on the shares held in the property-rich companies, as Junior Member tried to alert us to. With effect from 1 July 2013, a person ceasing to be a resident will therefore be deemed to have disposed of its assets, including an interest in an immovable property rich company at market value and re-acquired the assets at the same market value on the day before ceasing to be a resident.

Section 9H does not include title deed owned properties as suggested above.

The tax facts about immovable property held in SA at the date of tax emigration

Where a person ceases to be a resident [tax emigrate] the tax resident now emigrating) is deemed to have disposed of all [but then not all!!] its assets for market value on the day before ceasing to be a resident, and immediately reacquired the same assets at the same market value.

The gain (Market Value less base cost) divided by three, is added to taxable income. There may be certain exemptions which we now ignore for ease of argument.

The one-third (Feb 2015 tax year, watch this space for an increase to half!) added to taxable income, results in the so-called exit tax or exit charge is payable to SARS. Do note is is NOT the same tax Mark Shuttleworth successfully challenged. He challenged the exit levy paid to SARB

The exit charge, however, does not apply amongst others, to immovable property situated in South Africa, yet in most cases the deemed immovable property is subject to the exit tax. JSE shares in a REIT or other property trusts is normally not a deemed immovable property unless you own at least 20% of the REIT or company. Not easily achieved I argue.

In unlisted properties and private equity funds, you may own a share or equity or an interest (trust funds typically) that is a deemed immovable property because you own 20% of the immovable property rich entity.

An ‘interest in immovable property’ refers to a direct or indirect shareholding of a minimum of 20% in a company or ownership or right of ownership in any other entity if more than 80% of the market value of that entity is attributable to South African immovable property held otherwise than as trading stock. These entities are commonly referred to as ‘immovable property rich entities’.

The interest in immovable property will be subject to capital gains tax in South Africa once again in the future when actually disposed of by the now non-resident person (which could be death).

But all taxes are subject to double tax treaty relief. Depending on the relief provided in and the wording of the double tax treaty concluded between South Africa and the new residence jurisdiction of the non-resident, the disposal may ultimately not be subject to South Africa tax. For example: The amended SA/ Mauritius treaty now wish to reverse this treaty exemption yet the treaty is but a draft treaty only signed by SA. The said amended treaty itself, became outdated before implementation as STC was replaced by dividend withholding tax.

CGT on property in SA is not an easy topic, and best left to the experts.

[Shampoo]

Thanks for clearing that up with me Hugo. Googling the subject comes up with websites and blogs that have no dates and could be outdated. To further complicate matters is the wording on SARS website is written in a manner that us laymen cannot fully comprehend.

SARS will not correct you if they benefit from your ignorance of the tax regulations. Rather get an expert do do it for you.