Emigration / Relocation

[Cindylou]

I recently sent in a query to SARS regarding the tax implications of officially emigrating as opposed to relocating and received the following reply. (Note that the amounts referred to in the first paragraph have since changed to R4mio and R2mio respectively)

Kindly be advised that emigrants from the RSA must apply for a tax clearance certificate on a Form IT21(a), if their financial institution requires them to do so. Emigrants are allowed to take R1 500 000 per family unit, R750 000 per single emigrant, R1 000 000 overall insured value per family unit or single emigrant of household and personal and other effects. Emigrants who will not be receiving any income in the future from a SA source tax file will be closed ater all their tax affairs are up to date. Emigrants who will still be receiving income from a SA source in the future tax file will remain open and a tax representative must be appointed to deal with that person's tax affairs on their behalf.

Persons relocating overseas indefinitely or have intentions of returning back to the RSA must approach their financial institution in order to ascertain what amount of money, household and personal and other effects can be taken out of the country, and whether they require a tax clearance certificate. Persons relocating overseas tax file will remain open. A letter must be written to SARS to this effect and on their return back to the RSA. Those persons will be taxed on their world wide income. A tax representative must be appointed to deal with that person's tax affairs on their behalf in their absence

.

Hope this proves useful

Cindylou

[Riekie]

Thanks Cindylou, I've printed your post to show my husband as we are still trying to finalise our taxes in RSA and have funds from the sale of a property coming our way.

[Sandi]

I do apologise for 'bumping' an old post but found this very interesting...

We will be relocating on a 457 visa and applying for PR once we are there.

So how would this work for us? Can we inform SARS that we are emigrating on a 457 visa? This would make life easier with our finances!

Or do we have to say we are 'relocating indefinitely'?

[Springbok]

Persons relocating overseas indefinitely... tax file will remain open. A letter must be written to SARS to this effect and on their return back to the RSA. Those persons will be taxed on their world wide income.

From the Tax brochure for SA residents (attached):

With effect from years of assessment commencing on or after 1 March 2001, South Africa moved from a source-based system of taxation to a residence basis of taxation in respect of all income, subject to certain exclusions. The effect is that residents are taxed on their worldwide income, and no longer just on income that is from a source within or deemed to be within South Africa.

• Physical presence test

This rule is time-based and is only applicable to a person who was not at any stage during the relevant year of assessment ordinarily resident in South Africa. This test is based on the number of days during which a natural person is physically present in South Africa. It is important to note that a day includes a part of a day. Thus both the day of arrival and departure are included in the count. This test is also known as the day test or time rule. A day is regarded to start at 00:00, therefore, a person who arrives in South Africa at 23:55 would be regarded to be present in South Africa for a full day. However, any day that a person is in transit through South Africa between two places outside South Africa and that person does not formally enter South Africa through a port of entry, or at any other place as may be permitted by the Director General of the Department of Home Affairs or the Minister of Home Affairs, is excluded in the count.

The physical presence test must be performed annually in order to determine whether the individual concerned is a resident for the year of assessment under consideration. The test consists of three requirements, i.e. the person must be physically present in South Africa for a period or periods exceeding:

(i) 91 days in aggregate during the year of assessment under consideration;

(ii) 91 days in aggregate during each of the five years of assessment preceding

the year of assessment under consideration; and

(iii) 915 days in aggregate during the above five preceding years of assessment.

A natural person has to meet all three requirements before he/she will be regarded a resident (refer to the attached diagram “Annexure A”). The year of assessment starts on 1 March and ends on the last day of February in the subsequent year. In terms of the physical presence test, a person who is not ordinarily resident in South Africa only becomes a South African resident for income tax purposes as from the first day (beginning) of the sixth year of assessment if he/she is physically present in South Africa for the periods as set out above. The purpose of the presence is irrelevant. A day is therefore counted even if the presence is as a result of a holiday, visiting friends or a funeral.

A natural person, who is a resident by virtue of the physical presence test, ceases to be a resident if he/she is physically outside South Africa for a continuous period of at least 330 full days. The continuous period commences the day after the day on which he/she physically left South Africa. The person ceases to be a resident as from the day immediately after the day on which he/she left South Africa for a continuous period of at least 330 full days.

Note: Any person who is deemed to be exclusively a resident of another country with which South Africa has entered into an agreement for the avoidance of double taxation is excluded from the definition of resident.

[i.e. someone who officially emigrated...]

For more information regarding the physical presence test see Interpretation Note No. 4 available on the SARS website, www.sars.gov.za

=> Conclusion: if you are simply relocating to Australia and not officially emigrating, then do not set foot in South Africa for a continuous period of 330 days after leaving the country. Otherwise you will be deemed a resident and will have to pay tax to SARS.

If my interpretation is wrong - please let me know.

Edited May 18, 2007 by Springbok

[Guest Bronwyn]

I am so confused by all this stuff and I hate it. In fact, I want to stick my head in the sand.

I'm working in Australia and I changed my status here to 'Resident' so that half my interest (on house proceeds) wouldn't be withheld

All I need is to be double-taxed in SA. Then I work for free. Didn't tell them I was going anywhere...

To make it more confusing my husband is deemed non-resident, and still has a business in SA, and flew back tonight to sort out some business matters after about 180 days in Aus

I think I better get a sharp accountant and quick. Problem is I need one that understands both Tax systems and all the laws. He'll need to be a damn genius...

[Springbok]

From the Tax brochure for SA residents (attached):

=> Conclusion: if you are simply relocating to Australia and not officially emigrating, then do not set foot in South Africa for a continuous period of 330 days after leaving the country. Otherwise you will be deemed a resident and will have to pay tax to SARS.

Just for further clarification: In section 4, Foreign income received by South African residents (individuals), in the document "Residence Basis of Taxation for Individuals" which was attached in my previous post, refer to the paragraph about Employment income on pp. 6 - 7:

As a result of South Africa's residence basis of taxation, South African residents who derive income from countries other than South Africa are taxed in South Africa unless:

– an agreement for the avoidance of double taxation with another country stipulates that only the other country has a right to tax the income; or

– the income is specifically exempt from tax in South Africa.

With regard to any remuneration derived by a South African resident in respect of services rendered outside South Africa for or on behalf of any employer that remuneration is exempt from tax in South Africa if that individual rendered the services outside South Africa for -

– a period or periods exceeding 183 full days in aggregate during any 12 month period commencing or ending during a year of assessment; and

– a continuous period exceeding 60 full days during that period of 12 months.

Concerning the Double Taxation Agreement (DTA), South Africa does have a DTA with Australia (attached below). Article 4, para. 2, states that:

"Where by reason of the preceding provisions of this Article a person, being an individual, is a resident of both Contracting States, then the person shall be deemed to be a resident only of the Contracting State in which a permanent home is available to the person, or if a permanent home is available to the person in both Contracting States, or in neither of them, the person shall be deemed to be a resident only of the Contracting State with which the person's personal and economic relations are closer."

Article 23, para. 3 states:

"In the case of South Africa, Australian tax paid by a resident of South Africa in respect of income taxable in Australia in accordance with the Agreement, shall be deducted from the taxes due according to South African fiscal law. The deduction shall not, however, exceed an amount which bears to the total South African tax payable the same ratio as the income concerned bears to the total income."

[VeeM]

This is all very scarey... but then when is the South African SARS department anything but scarey....

HELP GUYS!!!!

Who out there has experiences in this regard. Who's gone over on a 457 (or a holiday) and had to come back for whatever reasons and been nailed by the SARS officials for taxes........

How bad is it? If we go over on one salary, get taxed in Aus and then taxed back in SA we'll be living on the beach with a cockle shell for a pillow!!! I can't be sure that we won't HAVE to come back during the first 330 days.... if one of my parents dies I'll be on the first plane for the funeral... do I just pray they can stick out the 330 days???

Also, on a "salary" of 80/90 thousand a year in Aus.... roughly what is your take home monthly/weekly salary... (how does medical aid work... is it like here where it comes off your salary or is it paid privately?)

I really need your help...

Vee

[VeeM]

Hubby read the info and his version is we will only be double taxed if we own property in South Africa and work in Aus.......

??? He's been wrong before... (haha).

[werns75]

this is scary.....I see my tax consultant next week and they specialise on immigration matters etc.....will update once info is received

[Cindylou]

We will be relocating on a 457 visa and applying for PR once we are there.

So how would this work for us? Can we inform SARS that we are emigrating on a 457 visa? This would make life easier with our finances!

Or do we have to say we are 'relocating indefinitely'?

I've just spoken to a "Cross Border Retail" expert at Nedbank and he informed me that one would not be allowed to exercise the emigration option unless one holds a SA passport with an Australian PR visa in it. So it would appear that you would relocate and then, upon grant of your PR, you can then apply to emigrate.

Hope that helps, Sandi, sorry for the late response to the question!

C'Lou

[Lisa T]

Thanks for starting this thread Cindylou! We have been wanting to look into this for some time now.

Does anyone know of really good tax consultants in the Durban area who have experience with emigration issues?

thanks

Lisa

[starfish]

=> Conclusion: if you are simply relocating to Australia and not officially emigrating, then do not set foot in South Africa for a continuous period of 330 days after leaving the country. Otherwise you will be deemed a resident and will have to pay tax to SARS.

Is the income that you would be earning in Australia during that 330 days then exempt from S.A. tax given the double taxation agreement ?

Also, anyone know what happens if you leave an income-generating asset (e.g. rental property) in S.A. while you're in living and working in Australia - who taxes the income ?

Regards,

Scott

[werns75]

Is the income that you would be earning in Australia during that 330 days then exempt from S.A. tax given the double taxation agreement ?

Also, anyone know what happens if you leave an income-generating asset (e.g. rental property) in S.A. while you're in living and working in Australia - who taxes the income ?

Regards,

Scott

to answer your first question: yes, the money you earn in OZ is exempt, BUT you MAY NOT enter RSA at anytime during the first 183 days, and thereafter you have to be out of the country at least 60 days in aggregate, otherwise they SARS see you as someone still earning revenue from SA and may tax you proportionally on the income earned in Oz.......

if you leave an income generating asset such as a rental property in SA, you are still obliged to pay tax on the income you received. If you still have a bond over the property, you can deduct the interest you had to pay as tax deductable, as well as any other expense. So the bottom line is, you still have to pay in SA and better get someone or a financial body to look after your affairs and submit the tax form otherwise SARS may slap you with a hefty fine.

I'm rather selling my properties since its just too much effort and admin to keep track of everything in SA....

[JanCPT]

Hi All

I've gone thru all the legalise above and am not surprised that some people are scared shirtless when they read it.

The simple explanation is that:

You are only taxed in SA if you are 1. a natural resident, or 2. deemed resident or 3. if you earn income from a source in SA

1. A natural resident is a person who considers SA as home / natural place to return after his wanderings are completed - ie no matter what visa you are on, if you have no intention of returning to stay in SA, you are not a resident. - No matter what someone at SARS tries to spin you, these are the international legal tests of a "resident" and are recognised in SA Tax Courts (perhaps I should say "should be recognised", because I've seen some cases where the Judges have decided to apply UBUNTU principles and GOD alone knows where they get the basis for their judgements from)

2. The deemed resident is based on the no. of days as listed above, and are easily measured & overcome by checking your passport days - if you have made Aus your home, I can't think that you would want to return for these no. of days in any case

3. The source principal would generally relate to income earned from property in SA, after you have "emmigrated" - once you are no longer a "resident" or "deemed resident" you will only be liable for tax, in SA, on the income earned from a SA source, ie from the property and nothing else

Most SA's that leave for Aus, however, get a job for which they are paid a salary and even if you still are, or SARS tries to maintain that you are, a resident, your salary earned is exempt from tax in SA. ie even someone who has not emmigrated, and earns a salary, for at least 6 months in Aus, will not be liable for tax on that salary in SA (of course there are exceptions, but these are the general rules)

SA's on a 457 visa will therefore pay their normal tax on their salary in Aus & will not be liable for tax on that salary in SA

Of course they may still be taxed on other income in SA (ie rental property or other business interests in SA) and this could lead to a messy affair between the SA & Aus tax authorities, but the net effect is that, once the mess is sorted out, you will only be taxed in 1 of the 2 countries & will never be taxed in both, on the same income (Lisa, you would not need a tax fundi to sort this out for you, the rules are pretty simple and more of an administrative issue - any CA(SA) in Dbn should be able to help you)

Hope this is a more understandable explanation of the position and allays some of the fears.

Regards

Jan

Edited August 16, 2007 by JanCpt