Tax emigration from South Africa is often seen as complicated and stressful.
Many people wonder if it’s even necessary to do, and there is so much misinformation and scare-mongering in this industry, so we wanted to share some of the benefits of tax emigration to put the record straight.
Rand Rescue is one of the leading specialists in tax emigration from South Africa.
We also assist people looking to move money from South Africa to many countries around the world.
The most obvious benefit of tax emigration from South Africa is that you can cash in your retirement annuities and move the money to your new home country.
This is the main reason (but not the only reason) why people choose to complete tax emigration.
Even if you are under 55 years of age, you can surrender your retirement annuities and get the money paid in cash to your bank account in Australia (or wherever you are living).
There is no restriction on what you can use the money for either. You do not have to put it straight into your superannuation fund in Australia (in fact you should really check with an accountant before you do this as there are annual personal contribution limits before you attract tax). Many people choose to use some or all of the funds towards setting up a new life in Australia, or putting it towards a house deposit – the choice really is yours.
Current rules stipulate that you need to have 3 years of tax residency in another country before being able to surrender your retirement annuity through tax emigration though – previously this could be done as soon as you were registered as a tax payer in another country.
Another reason why people choose to complete tax emigration from South Africa is so that they can receive an inheritance from South Africa. If you no longer, or never had, a green ID book, you cannot simply open a bank account in South Africa from overseas.
This means in order to receive a payout from an inheritance, you need to complete the tax emigration process, which then allows you to open a non-resident account in South Africa to receive your inheritance funds. Note that while this is not required, if there is a bank involved in the capacity of an executor of the estate, they often demand proof of tax emigration before they will agree to pay out your inheritance.
Let’s face it, who likes completing their South African tax return every year? The joys of e-Filing, hey?! If you complete tax emigration from South Africa, you cut all ties with SARS as your financial affairs in South Africa are deemed to be concluded.
After the process is complete, you need to complete one final tax return in South Africa and then you’re done – for good!
The rand to Australian dollar value has been up and down like a yoyo these past few months.
But look at the long term history of the rand against the Aussie dollar and you’ll see one obvious trend. Down.
Back in 2008 the rand was sitting at around R6 to the AU Dollar. Today, it’s well over R11. In just 10 years the value of the rand has almost halved. While no-one can predict anything when it comes to stock markets and currency values in the future, past performance is not looking good for long term gains on our rand value.
Cashing in your policies and assets now could mean you get more bang for your buck compared to waiting until they mature.
With the recent change to ‘expat tax’ rules in South Africa, if you are working outside South African and you earn under R1.25m (equivalent to local currency), you will not have to pay any income tax to SARS – there is a R1.25m exemption threshold.
While this sounds like a lot, it’s not just your base salary that SARS is including as earnings. It can include other allowances and fringe benefits, so if your employer pays for housing, bills, flights, travel, etc, you could tip that R1.25m threshold quite easily.
If you are earning over R1.25m, according to the SARS calculations, you may be pursued for tax by SARS if the tax rate you pay in Australia (or wherever you live) is less than what you would pay on the same amount in South Africa.
Example – say you are taxed on your Australian income at 30% but in South Africa you’d be taxed at 40% on the same income level, SARS may try to recover the additional 10% from you.
If the thought of paying over any of your overseas earnings to SARS is not one you want to consider, tax emigration could be the best path for you. For those who have completed tax emigration, you cannot subsequently taxed by SARS on your foreign income as you have closed your tax ties to the country.
If any of these reasons resonate with you, we would love to help you with your tax emigration. Rand Rescue works on a no funds no fees basis, and we provide free quotes, so what are you waiting for? Contact us today and let us help you rescue your rands.
*Please note this blog post does not constitute financial advice in any form. Please consult a registered financial advisor for advice on moving and investing your funds.