Most South Africans living abroad will be aware of reforms to the so-called ‘expat tax’ introduced this year by the South African Revenue Service (SARS). Until March 2020 income earned overseas by South African expats was not subject to South African tax providing certain conditions were met with regard to residency and time spent in South Africa.
The amendment to the Income Tax Act which was introduced in March 2020 removed the exemption on tax on foreign income for South African expats and as a result many will be facing their first tax payment to SARS.
The reforms have left many South African expats looking for legal tax mitigation solutions to minimise their liability. One option is financial emigration but what is it and is it the right solution for you?
Financial emigration is the process whereby a South African resident changes their status with the Reserve Bank to non-resident for tax and exchange control purposes.
While many South Africans living abroad consider the possibility of financial emigration, it is not the easy solution it might at first seem. Those asking for this status must sever all financial connections with South Africa, although it does not impact on their citizenship. This can be difficult to do, particularly for those who own property and/or maintain strong family ties in South Africa.
In addition, it doesn’t always solve the problem of paying tax because even if someone opts for financial emigration, they could still be deemed ordinarily resident in South Africa.
While for certain South Africans financial emigration is a viable tax mitigation strategy, in the vast majority of cases it is not the best option. Financial emigration is a serious step which is very difficult to achieve and generally only recommended as a last resort.
If you’d like to talk through financial emigration and the other options available to you, do get in touch with us for expert advice based on your personal situation at info@infinitysolutions.com.
A leading provider of expat financial services and wealth management services across Asia.
