Tax Migration

WHAT IS TAX MIGRATION ?

Physically emigrating does not necessarily mean that a person’s South African tax residency terminates. You need to formally inform SARS of your intent to cease to be a tax resident.

South Africa has a “ residence- based “ tax regime system and considers time spent in the country, your primary residence location and where you hold your assets.

Tax migration is the process of ceasing to be a tax resident of South Africa based on:

• Your country of residence and if South Africa has a DTA ( double taxation agreement ) with that country.
• Ordinarily residence test
• Physical residence test – The “Physical Presence Test “ – Minimum of 91 days in aggregate in each year – and – aggregate of 915 days in the 5 preceding tax years.

Remember, South African tax residents pay tax on their worldwide income and worldwide assets – Professional Tax Planning an imperative.

Frequently asked questions

1. What is the difference between Tax Migration and leaving SA?

If you have left South Africa to live abroad and have not notified SARS of your departure, you are still classified as a South African resident, deemed to be living “temporarily” abroad.

2. Do I need a tax clearance from SARS to emigrate ?

A tax clearance certificate (TCC) from SARS confirms that your tax affairs are in order. A TCC may be required to emigrate, depending on the number of years you have lived abroad. However a TCC is a mandatory requirement to withdraw your retirement annuity, irrespective of how long you have lived abroad.

3. Will I forgo my South African passport by emigrating ?

No. After Tax Migrating, you are still considered to be a South African citizen and will retain your South African passport.

4. Do I need to close my bank account in SA ?

No. Clients can maintain their South African accounts, however once migrated , they need to advise their bank of the change in their tax residency status, and they would need to change the account type to “ non- resident “.

5. Do I have to transfer all my assets abroad once I have emigrated ?

No. Assets can remain in SA and any bank transactions/debit orders can remain valid as before.

6. What happens when you change your South African tax residency?

The day before you become a non-resident for tax purposes, you will be deemed to dispose of your worldwide asset base at market value. This triggers a Capital Gains Tax (CGT) event – also known as an exit charge.

The most important to note here is that, as a South African tax resident, you pay tax based on your worldwide income and your worldwide asset base.

Whereas a non-tax resident only pays tax on their South African sourced income and South African sourced asset base.

Changing your tax residency status requires engagement with professional services to take care of the Tax emigration status process.