Following the implementation of “Expat Tax” from 1 March 2020, government has further proposed to remove the exchange control treatment for individuals, while strengthening the tax treatment. The intention is to allow individuals who work abroad more flexibility, provided funds are legitimately sourced and the individual is in good standing with the South African Revenue Service. This is set to take place from 1 March 2021 meaning you have under a year to formalise your non-residency for tax purpose under current policy.
Why is this bad?
Many South Africans abroad have formalised their non-resident tax status through Financial Emigration, and this process has now proven to be a thorn in SARS and National Treasury’s side. A proposed change to the emigration rules, which is set for 1 March 2021, appears to be a desperate bid to stem the tide of South Africans making up their mind to ‘divorce’ South Africa fiscally through Financial Emigration. This means SARS will aggressively target expats as an untapped pool of potential revenue, exposing your offshore trusts, foreign income streams and other assets held abroad.
How will SARS find me?
Under existing international standards, South Africa participates in the automatic sharing of information between tax authorities on individuals’ financial accounts and investments. Government expressly stated in February 2020 that these cooperative practices will remain in place to ensure that South African tax residents who have offshore income and investments pay the appropriate level of tax.
What are the next steps to “avoid” the Expat Tax?
We urge all South Africans working abroad permanently to formalise non residency. Financial emigration remains the main process in formally ceasing tax residency through SARS and SARB. Now is the time to comply with formalities and ensure your worldwide income is not liable for South African tax.