The countdown has started for South Africa’s controversial expat tax – and if you are a South African abroad and have yet to start planning how to protect your finances, here is some vital information to get you started.
From March 2020, any South African expat classed as ordinarily resident faces a 45% income tax on their earnings of more than R1 million a year outside South Africa.
Here are the answers to the most frequently asked questions about the tax:
How will the new tax impact South Africans abroad?
Current rules allow South Africans living and working overseas to have their tax affairs dealt with in the country where they are located, providing they are outside South Africa for 183 days or more in any 12 months. This period should also include 60 days in a row overseas.
This rule will not change on March 1, 2020.
The change is instead of all income being exempt from tax in South Africa, only the first R1 million is tax-free – the rest will be taxed at 45% or more.
Who must pay the tax?
Any South African working overseas
Why are the tax rules changing for South African expats?
The current rules made tax simple for the South African Revenue Service and the tax authority where an expat lives and works. Instead of paying double income tax, only one set of rules applied.
But SARS realised many South Africans have opted to move to low or zero income countries to pay little or no tax on their income. Favourite destinations include Dubai and Abu Dhabi in the United Arab Emirates and other Gulf States, such as Bahrain, Oman and Qatar.
What should expats do about the SARS tax?
There is no one-size suits all answer.
Many South African expats are thinking about financial emigration, but this may solve their income tax issues but leaves them open to becoming a tax resident elsewhere.
This may also be complicated by what to do with a home, savings and investments in South Africa.
Best advice is to talk to a tax professional who will review your personal financial affairs and tailor a solution that best suits your personal circumstances.
For more in-depth information about the South Africa Expat Tax read this article and download the guide