FInancial Emigration question

[John Bertrand]

HI all. We have been mulling over whether to financially emigrate or not, as eventually we will have an inheritance pay out years from now. Does anyone know if:

 

1 - If you financially emigrate whilst in Aus, and you own a single home (primary residence) in Aus (but no other South African assets or properties), does this home get hit with South African CGT?

 

2 - If (1) is true, is the CGT levied on your home on the day your financial emigration is approved, or, back when you first became a tax-resident in Aus? (which in our case is before we bought the house), OR back when you first permanently arrived?

 

3 - Apparently, if you've spent > 5 years in Aus, you don't need a tax clearance certificate in SA when doing the MP336b. Does this affect (1) or (2) above?

 

Would appreciate any insight from people who have done this.

 

Thanks

John

 

 

 

 

[DAC]

Any update on information regarding financial emigration and CGT?

 

I'm in the same boat John, been out of SA for a long time, but never formally emigrated, but am now thinking about it due to a potential small RA and inheritance.

The process on the reserve bank site sounds straight forward with regards to the SARB Emigration requirements and some information that I've sources online - But then there is the Tax and CGT question on your assets with respect to SARS?

 

If you have already been out of SA for a number of years, and under both the ordinary and physical presence tests are regarded already as a non-resident, does this them impact on the CGT requirements? As in non residents only pay CGT on their SA assets, which would then exclude Australian assets?

 

Regards, DAC

Edited August 25, 2017 by DAC
Update

[John Bertrand]

What I have learnt is that (and I can't confirm this as I'm not a tax lawyer):

 

1 - The CGT implication on financial emigration is only on SA properties and portfolios (can anyone else confirm this)?

2 - We did consider financial emigration, but realised we may not have to do this now. The new changes to the 183 rule only apply to south africans who are residents for tax purposes. So if you've lived in Australia for eg 8 years, own a home here, and never intend returning, (and even better, if you sold your home(s) in SA), then you are regarded as a non-resident for tax purposes, which this new tax rule doesn't affect.

3 - We do have an inheritance coming (30 years from now) and some small RA's in SA. I think the rules in 30 years will be vastly different and potentially even easier (more 1st world?) then, so since we don't need the money here, we can leave it there for now. Upon payout of the small RA's, we can just use those for pocket money on holiday trips to SA.

4 - If you do want to financially emigrate, and if you've been out of SA >5 years, you don't need a tax clearance certificate to do financial emigration which is a huge headache. So just the SARB side of things.

5 - SA can never double tax people in Australia while the dual tax treaty exists. I think rental income is taxable and payable in SA, but then you claim a credit on that in Aus. The rest of your tax is paid in Aus.

6 - SA might implement a US style tax treatment of it's citizens in the future, which means that every citizen, regardless of where you are, what you're doing, how old you are, where you live, what size shoe you wear etc., will have to file a tax return on worldwide income (think 90 year old grandmothers in the UK suddenly having to file a tax return). I hope it doesn't come to that, I think the US and one or two other countries are the only one's that have such draconian rules for their people. I that does happen, we would renounce our SA citizenship.

 

Again, not 100% sure on all the above, just my current understanding. Happy to be corrected by others. I wish these types of things could be posted by SARS on their website instead of entangling it in thousands of pages of legalese and tax speak.

 

Regards,

John

 

 

 

 

 

 

 

 

[Nev]

Hi John,

 

I found this chap when trying to get the latest tax dilemma figured out, he sounds like the right chap to answer your questions as well

 

 

[DAC]

@John Bertrand Probably best to still get confirmation and information from an expert as @Nev has pointed out above, but I have come across a bit more information.

 

Quote

Section - J vi a hh

Authorised Dealers are furnished with a duly electronically completed 'Tax Clearance Certificate – Emigration' obtained via the SARS Tax Compliance Status System confirming that suitable arrangements have been made to liquidate any obligation in this regard. However, a Tax Clearance Certificate is not required in respect of applicants who resided permanently outside South Africa for a period longer than five years and where they have no assets other than inheritance or insurance policies; and

(ii) the applicant declares in writing to the Authorised Dealer that similar emigration formalities have not been recorded with another Authorised Dealer.

J vi b

The date from which such applicants will be regarded as emigrants from South Africa will be the date on which permanent residence was granted in their new country of residency. In the absence of such proof, Authorised Dealers must use the date on which the belated Form MP336(b) was signed by the applicant as the date of emigration.

 

In theory based on the information above the date you are regarded as an Emigrant is from when I became a permanent resident which in my case was years ago, and was before I purchased any assets (house, etc). Logic would then dictate that CGT would not be payable in my case. (I know logic doesn't always get followed, hence the comment above about still getting expert advice).

 

For those interested you can access and download the 'Currency and Exchanges Manual for Authorised Dealers' document quoted above from - https://staging.resbank.co.za/RegulationAndSupervision/FinancialSurveillanceAndExchangeControl/Pages/CurrencyandExchangesdocuments.aspx (Click on the 'Currency and Exchanges Manual for Authorised Dealers' heading to access the document')

Edited September 4, 2017 by DAC