Top tax questions answered
What tax do you pay if you move abroad?19th Oct 2021
Emigration is, unfortunately, something that many South Africans are considering at present. There is a myriad of reasons why many leave South Africa, but many blame the crime, lack of safety and rolling blackouts for feeling the need to seek pastures new.
The tax implications of such a move, is generally top of mind. ‘There’s often a lot of confusion about what transpires when one emigrates from a tax and exchange control perspective. This is because it is a complex regulatory area and people tend to hear a range of different soundbites regarding how best to go about it, and what outcomes may arise,’ says Andrew Welsted, partner: co-head of tax at CMS South Africa.
If you’re one of the many considering your options but also worried about tax rules and regulations, read on for answers to some top tax questions that’s on most emigrants’ minds.
Do I pay tax on the income I earn abroad?
Ralph Wichtmann, consultant at Sovereign Trust SA says: ‘If the South African person has tax emigrated and becomes tax resident in their new country of residence, their income/assets will be subject to the tax laws of that country.
‘However, if they still have an income source from South Africa or asset based in South Africa (e.g., rental income from a South African property that they still own), then this income will be taxable in South Africa.
‘In contrast if you are still a South African tax resident, you are taxed on your worldwide income as well as your assets based outside of South Africa. It’s important to note that you can be tax resident in South Africa in terms of either the ordinarily resident test or the physical presence test.’
Is there any tax exemption on income earned abroad?
Wichtmann says: ‘Only the first R1.25m of foreign employment income earned by a South African tax resident will qualify for exemption. If the income that they receive exceeds the above amount, then the difference might be subject to income tax in South Africa as well as the country where the income is earned.
‘In these circumstances the DTA (double taxation agreements) concluded between the countries can be used to prevent that the same income is taxed twice and the tax laws of the countries can also make provision for a foreign tax credit in the instance where the same income has already been taxed by the other country.’
Do I have to declare non-South African sourced income?
A spokesperson from AJM tax says: ‘If you are a South African tax resident, you should consider claiming the appropriate tax credits in South Africa. If you are not a South African tax resident, you should rectify your South African tax returns to only reflect South African source income.’
Do I pay capital gains tax?
According to Welsted, non-residents are not subject to capital gains tax in South Africa other than in respect of disposals of immovable property located in South Africa such as shares in a company, cryptocurrencies, or certain other moveable assets.
Being a tax resident has huge fiscal implications versus not being a tax resident. ‘One pays capital gains tax on the capital increase in the value of certain assets on the date of acquisition.
The tax rules deem the emigrating party to dispose of their assets at market value and the tax is levied at a maximum effective rate of 18% for individuals,’ adds Welsted.
How can I make sure I don’t pay tax in South Africa if I pay tax abroad?
Wichtmann says: ‘It’s important to determine where you are tax resident as this will of course play a key role where you will be required to pay tax on your income.
‘The second point to consider is in which country are you generating the income (income source) as that country will probably have the taxing rights on that source of income and then by applying the DTA and/or foreign tax credit made provision for in local tax laws, you can possibly prevent being taxed on the same income twice in two different countries.’
How can I find a tax expert to help me?
If you’re still not sure about your financial affairs or have further tax questions, it’s best to contact a specialist tax advisor that can help you with your move and household finances. To find the right tax practitioner, consult the South African Institute of Taxation.
‘It’s also good to check if the controlling body is accredited by the South African Revenue Service,’ adds Wichtmann.