By: Claudia Apicella, Head of Expatriate Tax Compliance at Tax Consulting SA.
South African expats have been subjected to vast amounts of conflicting information regarding the amended expat law change, causing uncertainty and panic in their preparations for 1 March 2020.
The cause for this is no doubt linked to the many “specialists” creeping out of the woodwork, so to speak, and offering an array of tax relief processes for South African’s residing abroad which ultimately portray “quick fix” solutions or incorrectly completed processes at exorbitant costs.
Many services that are being offered to South African expats, in relation to tax relief mechanisms, are unfortunately not in line with the requirements of the South African Income Tax Act No.58 of 1962’s two tax-residency tests, the South African Revenue Service (SARS) nor exchange control regulations of the South African Reserve Bank (SARB).
What is Financial Emigration?
One of the most common processes being widely publicised is Financial Emigration and has become the weapon of choice when offering South African expats tax relief on their foreign income in preparation for March 2020.
Although, when Financial Emigration is applied for correctly, the process does offer certainty that one has ceased tax residency in South Africa.
The key issue here is that the fundamental steps to achieve this are not always adhered to, thus resulting in a process not correctly done which creates tax exposure for South African expats.
The harsh reality is that many expats are undergoing “Financial Emigration”, taking into consideration only the exchange control aspects thereof, and thus not dealing with important tax implications.
How will I know that my financial emigration is done correctly resulting in non-residence for tax purposes as well as for exchange control purposes?
Nicolas Botha, Tax Diagnostic Specialist at Tax Consulting SA
This is where careful due diligence is needed.
It is imperative that when undergoing the financial emigration process through a service provider, that all compliance steps for the financial emigration process are clearly defined by the provider to the client.
From a client perspective, the best first step will be to determine if the provider is offering financial emigration or formal emigration. These are often referred to as being the same process, however this is not the case.
Financial emigration- is a two-fold process which includes a SARS component dealing with the legal aspects of non-tax residency as well as the formal emigration component dealing with the SARB aspects of exchange control.
Formal emigration- on its own does not fully deal with the tax aspects.
The best way to check this is if the company requests you to outsource your tax affairs to a tax practitioner or consultant - meaning they only assist with formal emigration.
Tax aspect of Financial Emigration
The first step to a correct financial emigration is a tax check or compliance check with SARS.
Once this check is completed a reputable consultant will be able to advise on the best path forward for the process, in order to ensure that all the compliance “boxes” in regard to ceasing of tax residency are “ticked”.
In order to cease tax residency, one must meet the requirements of South Africa’s two tax residency tests and must complete a deemed disposal as per section 9H of the Income Tax Act.
The deemed disposal, is where one is deemed to have disposed of their worldwide assets, and immediately re-acquired them, thus bringing about a Capital Gains Tax (CGT) event – which is often referred to as an “exit tax” from South Africa.
Once the deemed disposal has been calculated, and the CGT event declared, an application to acquire an Emigration Tax Clearance Certificate (ETCC) should be made to SARS.
Acquiring this is the last step in formalising your non-residency from a tax perspective.
Thereafter you can look towards the second part of financial emigration – the exchange control aspects thereof.
Exchange Control Aspect of Financial Emigration
Roger Aires, Financial Emigration Specialist at Financial Emigration.
The SARB process required for a correctly executed financial emigration is actioned after the SARS process, in line with our Income Tax Act and exchange control regulations.
The SARB process once concluded will further confirm one’s emigrant status for exchange control purposes.
For the SARB process of financial emigration, there is no requirement that the individual sell nor dispose of any assets in SA to include shares, trusts, properties and policies.
All assets can be kept as long as they are correctly declared to SARB.
One can also successfully complete the financial emigration process should they have properties that are bonded as well as vehicle finance.
In addition, one can keep SA bank accounts as long as they are with one banking institution with no need to cancel such bank accounts and open new blocked asset accounts with another bank.
Escaping Shark Infested Waters
The crux of the matter is that undergoing the correct financial emigration process will prove one’s intention to permanently reside outside of South Africa which coincides with South African tax residency tests – thus the formalisation of both exchange control and tax residency statuses being noted as “non-resident”.
We strongly recommend that proper due diligence is followed when using a provider for something as important as Tax Residency and Financial Emigration to avoid unwanted tax exposure come 1 March 2020.
Secure a provider who has registered tax practitioners and admitted tax attorneys with a long track record of successfully completed Financial Emigrations to help you navigate into safer waters.
MEDIA CONTACT: Rosa-Mari Le Roux, 060 995 6277, firstname.lastname@example.org, www.atthatpoint.co.za
ABOUT Tax Consulting SA:
Tax Consulting SA offers a streamlined service in the calculation and filing of individual income tax returns, provisional income tax returns or any other more complex individual tax relate matters. Our highly qualified team of Tax practitioners are registered with SARS under controlling body of the South African Institute of Tax Practitioners (SAIT). As tax specialists, we remove the burden from clients to keep their tax affairs in good order, achieving optimal tax savings while ensuring full compliance.
For more information on Tax Consulting please visit:
LinkedIn: Tax Consulting South Africa
Facebook:Tax Consulting South Africa
The latest unemployment statistics released by Statistics SA for the second quarter of this year paints a very dark picture of the state of South Africa’s labour market.
According to the statistics there has been an increase of 1.4 percentage points in unemployment from the first quarter of this year. This means that almost 7 million people are unemployed and just over 16 million people have a job.
A recent critical skills survey by Xpatweb shows several sectors in the economy are experiencing critical skill shortages. The sectors experiencing the most pressure include information and technology, engineering, finance and health.
The Critical Skills list is currently under review by the Department of Home Affairs and a new list is expected to be released before the end of 2019 for public comment.
However, the Xpatweb survey shows that the country is currently in desperate need of the following skills:
According to the World Health Organisation (WHO), South Africa has an average of one doctor and one nurse per 1,000 patients. Hospitals are crowded, but understaffed, as shortages of skilled professionals in this sector continues to be an issue.
IT Specialists are becoming a highly sought-after resource in the wake of the Fourth Industrial Revolution (4IR). In a report published by the World Economic Forum over one-third of skills (35%) that are considered important in today’s workforce will have changed over the next five years.
By 2020, the Fourth Industrial Revolution will have brought us advanced robotics and autonomous transport, artificial intelligence and machine learning, advanced materials, biotechnology and genomics.
Government revealed in 2017 that South Africa has a shortfall of about 40,000 qualified artisans. This forced it to import skilled artisans from various countriesto complete time sensitive projects.
The Xpatweb survey results show that this still remains an issue, with 14.15% of the respondents indicating that it is difficult to find skilled artisans. This represents an increase of 45% from last year.
There is little doubt that skills are essential to economic growth, job creation and the future prosperity of South Africa.
It is a growing challenge worldwide, affecting industries from ICT to manufacturing to finance, with jobseekers lacking the required skills, and those with the desired capabilities and experience, in high demand.
Employers have to compete locally and internationally for skilled talent which increasingly places pressure on organisations.
The Xpatweb survey also showed that 62% of participants blamed the visa process as the greatest prohibitor to recruiting internationally.
However, several visa-related reforms are on the cards, which is in line with President Cyril Ramaphosa’s Economic Stimulus and Recovery Plan. This includes a review of the critical skills list expected to be published later this year.
Xpatweb is once again conducting its survey and the 2019 results will be submitted to the Department of Home Affairs and Parliament in line with the White Paper on International Migration and Department of Higher Education and Training National List of Occupations in High Demand and specifically to address any occupations not catered for on the new draft list.
The survey offers an opportunity for mobility and human resource practitioners to help shape law. (See link below to participate in this year’s survey).
In order to tackle the skills shortage in SA, it is important that policies such as the Skills Development Plan and the Skills Development Act support job creation and economic growth. It is equally vital that organisations contribute to building local skills, through increased training and development and putting in place succession planning at executive level.
For the youth, it cannot be stressed enough that when choosing a career, it is important to do the necessary research in terms of occupations in high demand and to use the information when making decisions about which path to pursue.
Link to survey http://www.xpatweb.com/critical-skills-survey-2019/
MEDIA CONTACT: Rosa-Mari Le Roux, 060 995 6277, email@example.com, www.atthatpoint.co.za
HOLISTIC EXPATRIATE SOLUTIONS
The Xpatweb group has been in existence for over 14 years and includes over 70 professionals, including immigration specialists, mobility practitioners, tax practitioners, attorneys, and chartered accountants. They offer holistic, client-centric, and fully compliant expatriate and work visa solutions. Clients can expect an exceptional end-to-end service that starts with an initial technical meeting to discuss any past challenges, a recommended optimal solution, and the creation of a roadmap and protocol for service delivery. They also offer an on-premises immigration audit service to confirm expatriate employees hold legally obtained, valid visas, and that their duties align with their visa conditions. In addition, their unique online immigration tracking system helps you to easily manage and track expatriate assignees across the globe, is fully customisable and dashboard-driven, and provides a secure repository for storing assignees’ documents.
For more information on Xpatweb please visit:
Welcome to the Tax Consulting newsroom.