Financial Emigration - Left 4.5 Years ago

[eitai2001]

Hi All.

 

I'm a little confused about this Financial Emigration thing I've come to hear about.

I permanently migrated to Australia 4.5 years ago. On my last tax return (4.5 years ago), I ticked the box that said Non-tax resident or something along those lines.

I haven't looked at SARS since.

 

I don't meet either of the tests for SA Tax Residency (Time in SA & Intention). In 4.5 years, I've been back 3 or 4 times for a holiday.

 

I can't remember if I actually did a Reserve Bank Financial Emigration ... I remember getting a Tax Clearance certificate, but can't remember for what.

 

Am I still going to be subject to this Expat Tax (I have just applied for my AU Citizenship, thought have also requested and received permission to keep my SA Citizenship)?

 

I would have thought that Financial Emigration of the Reserve Bank does not equal non-Tax Residency, and you can even be tax resident (based on intention at least) even if you have done Financial Emigration.

 

So I have no idea what to do. My intention to leave SA for good came up the day I bought my flights 4.5 years ago.

 

Regards

 

Itai

 

[eitai2001]

Oh, and is there a way to check if I have actually Financially Emigrated?

[ChrisH]

7 hours ago, eitai2001 said:

Am I still going to be subject to this Expat Tax

 

As far as I know if you spend more than a certain amount of days a year outside of ZA you are not subject to this new expat tax even if you haven't financially emigrated.

 

@Hugo2, please correct me if I'm wrong.

[Hugo2]

7 hours ago, ChrisH said:

 

As far as I know if you spend more than a certain amount of days a year outside of ZA you are not subject to this new expat tax even if you haven't financially emigrated.

 

@Hugo2, please correct me if I'm wrong.

Hi

no there is no number of years outside SA test for Australia. The expat tax escape is only based on the definition of tax resident vs ATO tax resident

15 hours ago, eitai2001 said:

Oh, and is there a way to check if I have actually Financially Emigrated?

One check only: did you ever operate a blocked account? Yes, you have financially emigrated. No, you are a an Excon resident temp abroad albeit that you may be tax non resident

[Hugo2]

15 hours ago, eitai2001 said:

Hi All.

 

I'm a little confused about this Financial Emigration thing I've come to hear about.

I permanently migrated to Australia 4.5 years ago. On my last tax return (4.5 years ago), I ticked the box that said Non-tax resident or something along those lines.

I haven't looked at SARS since.

 

I don't meet either of the tests for SA Tax Residency (Time in SA & Intention). In 4.5 years, I've been back 3 or 4 times for a holiday.

THERE IS NO SUCH A TEST IN TAX LAW

 

I can't remember if I actually did a Reserve Bank Financial Emigration ... I remember getting a Tax Clearance certificate, but can't remember for what.

YOU NEED A SPECIFIC TAX EMIGRATION CLEARANCE FOR FINANCIAL EMIGRATION - DID YOU OPERATE A BLOCKED ACCOUNT? ITS THE ONLY TEST

 

Am I still going to be subject to this Expat Tax (I have just applied for my AU Citizenship, thought have also requested and received permission to keep my SA Citizenship)?

THE ANSWER IS NOT BASED ON NATIONALITY, NOT RELEVANT FACTS

 

I would have thought that Financial Emigration of the Reserve Bank does not equal non-Tax Residency,

100% CORRECT

 

and you can even be tax resident (based on intention at least) even if you have done Financial Emigration.

CORRECT AND VICE VERSA

 

So I have no idea what to do. My intention to leave SA for good came up the day I bought my flights 4.5 years ago.

NOT RELEVANT FACTS FOR TAX, FOR EXCHANGE CONTROL IT COULD BE

 

Regards

 

Itai

 

 

[Hugo2]

You can only escape the expat tax #Tax2020 if you a tax non- resident in SA.

 

You can only become tax non-resident on one of three ways. The first is a test for persons that immigrated to SA before they emigrated from SA

 

1. 330 days outside SA test. If you were born in SA or was married to a SA national or had kids born in SA, forget this one. Not relevant. I have only seen persons from China, Philippines entering SA, becoming tax resident on the 5 year 915 days IN (!!!!, not outside) test. In short forget this one

2. If you have a Oz PR, and you pay ATO tax on worldwide income AND the tax treaty favours ATO you will be deemed tax non-resident as the treaty deems you ATO resident. That means probably no habitual home in SA, your wife and minor children in SA or you lost your SA passport and have no wealth left in SA

3. If you became ordinarily NON resident i.e. you have no PR but your lifestyle suggests that you will never go back to SA, older SA people, the investor visa and last family members. You may not have PR but sold everything in SA and all your children are outside SA. No more home in SA, and Oz is where you return to after all your journeys, where you spend Xmas and Easter. 

 

Financial emigration can assist in 2 (center of vital interest) or 3 (evidence in support of intention not to return)

 

I heard some commentators pointing out the Quanta Pilots ex SA is also expat tax exempt - it is not true. The ATO/SARS treated refers to MAY, yet the USA (Dubai treaty) says shall only be taxed in UAE or where the employer or airline (Emirates) is  tax resident 

 

I hope this guides you. I will be in Mauritius, Dubai and Doha during April to lecture on this topic. Please share with friends 

D_DAY-TAX_HUG_v2.pdf

[eitai2001]

Hey Hugo.

Thanks for that. Great analysis. So it seems I do not actually need the Financial Emigration, as I literally have no assets in South Africa, I uprooted everything and married an Australian. 

So sounds like I meet point 2.

 

The next question is whether there is a point to doing financial emigration. It does provide the evidence for 2. But what is the burdon? I believe there is an 18% tax on worldwide assets including cash.

Can this be done retrospectively as I left on 1 September 2014 and never returned. If so, does that mean I am only taxed 18% on my cash balance then, or is it still my cash balance now? If it is the latter, it is too costly to do financial emigration, so I guess I ask if I even need to.

Thanks

Regards

 

Itai

[XXXXX]

Hi 

 

Firstly to Hugo - thank you for one of the more reasoned reviews of financial emigration that I've seen.    Its so refreshing to see someone sticking to facts and the legislation as written and applied, rather than the hysterical "Financial immigration is your solution to the expat tax" which has become so popular with so called tax "experts", who incidentally will assist you with financial immigration (for a fee).  

 

Eitai2001 - the so called "Exit tax" you refer to, is a capital gains tax on a deemed disposal on (certain) assets on you ceasing to be a South African residence.  Key points to note are as follows.

1.  This deemed disposal and resulting capital gain is triggered by you ceasing to be a South African resident for tax purposes (which is not necessarily the date that you financial emigrated).

2.  The tax is not a straight 18% on worldwide assets, but on any calculated "capital gain" taxed (typically growth in value) at the prevailing rates (on the date you ceased to be a South African resident).

3. Certain assets are excluded from this calculation.    and typically growth in cash balances would not result in a capital gain 

 

From a practical point of view, SARS pretty much operates on a self assessment basis.  I.e. if you didn't declare the capital gain on ceasing to be a South African tax resident, they are unlikely to identify and assess you on the capital gain.  However DO NOT take this as a endorsement or acceptance by SARS on your tax position (a view that I've incorrectly seen on another forum).  Should you not have disclosed the capital gains, they are entitled to open prior year assessments on the basis of non disclosure (within limits) and any non-compliance leaves you at risk.   Also note that the process of Financial Emigration may trigger a review of your compliance.

 

The situation may get complex and will depend on your individual facts.    If necessary I encourage you to seek the advice of an appropriate tax professional . (and from my perspective, I'd be comfortable with Hugo).  

 

What I can say, is that if anyone says financial immigration is the only solution (without considering your underlying situation), look for another tax consultant.

[eitai2001]

Thanks very much for the response on this.

 

I never had any Capital Assets other than a car I sold a while before, so I think I should be ok from that perspective. (I still don't have any capital gain assets ... Australia is expensive!)

I'm in SA next week, so thinking of just doing the financial emigration just to have all my bases covered ... but as far as I understand, I probably won't have an issue.

 

Thanks for the advice. I'm probably in a very low risk category of having an unusual assessment.

[XXXXX]

An car would be excluded from any potential CGT implication.  Based on what you've disclosed above and provided that you have genuinely have no intention to return permanently to South Africa and are maintaining a household in OZ - I certainly wouldn't waste any money or time on the financial immigration process......

 

Incidentally, I have seen quotes from anything from R1k (SARB application only) to R18k for the process.

[eitai2001]

Oh wow, ok thanks.

I started the process online on SARSEfiling (I found some section for financial emigration certificate). And printed the 336 form from SARB. But didn't realise there was costs to submitting those. I may just give it a skip then.

 

I'm hoping to buy a home in Aus in the next year or two. My family is leaving SA, have nothing left there ... definitely no intention to leave. Not to mention my wife does not want to live in SA (She's Australian)

[XXXXX]

shortened process.

1. Lodge MP336P with authorized dealer (typically a commercial bank).

2. They return a stamped MP336 form, and you need to submit to SARS.  SARS to issue tax clearance

3. Submit tax clearance to authorized dealer and they submit to SARB

[eitai2001]

Ahhh, Ok, I misunderstood the steps. I thought 1 & 2 together was it. So what's an authorized dealer? I assume that's where the fee comes in?

[XXXXX]

typically a bank

Edited March 29, 2019 by XXXXX