South African expats fearing a tax crackdown are flocking to apply for a second passport through golden visa schemes in Europe.
Record numbers of South Africans are looking to this ‘Plan B’ to avoid paying more expat taxes from March 2020.
From that date, instead of paying no tax on overseas income, expats will keep the first R1 million earned tax-free and then pay income tax at a rate of 43% on any additional amount.
This has seen a 364% rise in South Africans applying for golden visas, according to tax adviser Marisa Jacobs of Xpatweb.
European Union residence visas or passports are offered by several countries, including Portugal, Cyprus, Greece and Malta.
Tax emigration underway
Other options are relaxing residence restrictions welcoming expats in the Gulf States, such as Abu Dhabi and Dubai, where no income or capital gains taxes are levied.
“Depending on the scheme, these EU Passports can be ascertained through Investments starting from €250,000 and take between six months and seven years to attain the EU Passport with no residency period in the country required. Therefore, a South African does not have to permanently live in the country to attain the EU Passport,” she said.
“Vast numbers of South Africans are looking to the future and are open to making the investment for both themselves and their children’s future.”
Tax emigration is seen by many as one solution for avoiding expat tax.
The rule applies to all tax residents in South Africa working overseas and earning more than the R1 million threshold.
Expats selling up homes
Meanwhile, a study from the First National Bank, Johannesburg, highlights the number of house sales due to emigration is rising in South Africa.
“Emigration-driven sales have become a more prominent feature of the housing market in South Africa over the past two years,” said the report.
“According to estate agents, these are estimated to have steadied at around 13.4% in the second quarter of 2019, marginally down from 14.2% in the first three months of the year.”
The report also notes many wealthy South African expats have sold investment property as part of their preparations for a financial break with the country.