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Expats want to remove their administrative footprint in SA

They would rather pay the tax now than deal with South African bureaucracy.
SA Reserve Bank rules discriminate against foreign nationals who have SA IDs. Image: Shutterstock

Recent changes to the rules of emigrating from South Africa are a driving force behind the tax emigration of retirees and second-generation South Africans who have been living abroad for many years.

The increased number of tax emigrants he is dealing with are all expats who have been out of the country for some time, says Hugo van Zyl, independent tax and exchange control expert. They want to remove their SA administrative footprint.

He says he is currently dealing with estates where the parents died abroad, but their SA trust funds and the non-resident children’s inheritance is “stuck” in SA.

In the past the mere formal emigration reference number allowed the funds to flow.

Since March 1, 2021 a child with a South African identity document who has been living abroad for years has to follow a tax emigration process to receive and transfer their legacy.

However, a child who was born abroad can receive and transfer their inheritance without tax clearance or approvals from the South African Reserve Bank (Sarb), remarks Van Zyl. The Sarb rules distinguishes and discriminates between a foreign national with no SA ID and a foreign national with a SA ID.

The changes

Ernest Mazansky, head of Werksmans tax practice, says in terms of the old rules there were certain processes once emigration had been approved. These included the remittance of up to R20 million of capital per year per family unit by an authorised dealer with an ordinary tax clearance.

Sarb approval was required for all larger amounts, and then a more stringent tax clearance process was followed. Over and above that, income on SA assets such as interest, dividends on listed and unlisted shares, property rentals and annuities were allowed to be remitted on an unlimited basis.

However, from March 1 these rules changed. Now it is R10 million per person and not R20 million per family that can be remitted.

This means both spouses have to apply for tax clearance, even though the assets might be in only one spouse’s name, says Mazansky.

Sarb still has to approve all larger amounts with the more stringent tax clearance process, irrespective of the formal emigration status. In terms of the remittance of income on SA assets, this has disappeared. Where someone could remit annually, for argument’s sake R50 million of income, one will now have to get Sarb approval every year.

Mazansky says he has no problem if the new rules are applicable to people who emigrate after March 1, 2021. Rules change. That is life.

Unfair 

“I do have a problem if a person who emigrated years ago on a particular basis, and who planned their financial life based on a set of rules, now finds the rules being changed for the worse.”

He sees no reason why, for people who emigrated before March 1, the old rules should not continue to apply. They are certainly less cumbersome than the new rules.

“It is here that I wonder if there might be room for a court challenge by someone who is of the mind to exercise their rights.”

Mazansky says there may be a possibility that income from SA could again be remitted on an unlimited basis, but there is nothing “concrete” yet.

Pre-legacy planning

Van Zyl, vice-chair of the South African Institute of Tax Professionals’ personal tax work group, says they are noticing an increase in “pre-legacy planning” where South Africans are donating their SA assets to their children living abroad while they (the parents) are still alive.

He says many South Africans formally emigrated from SA years ago, when their children were still minors. Before the new rules the children were able to obtain their inheritance without a tax clearance.

Now, even if they emigrated with their parents they have to open a rand account and the capital that was inherited must be deposited into that account. The beneficiary of the inheritance needs to get a tax number to get tax clearance, despite the fact that they were never the taxpayer.

In terms of the pre-legacy planning, parents are starting to donate their SA assets to their children abroad. Either the parent or the child obtains tax clearance, and they pay donations tax.

Preemptive donation

The children now own the assets which removes the need to pay capital gains tax on death, estate duty, executor fees, and allows them to immediately dispose of unwanted assets.

“Any estate practitioner will tell you that to obtain a local death certificate of a South African that died abroad, and the registration of a local estate for a foreign resident, is a nine to 18-month challenge.”

Expats are keen to pay the tax now to remove their administrative footprint in SA as they consider the South African bureaucracy the worst on the continent, says Van Zyl.

“Tax revolt is not about refusing to pay tax; it is about refusing to pay tax for a collapsed public service,” he says.

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Tax revolt is not about refusing to pay tax; it is about refusing to pay tax for a collapsed public service !!

Exactly — The quicker we all realise that and do something about it the better !!

There are three certainties in SA:

Tax, death and a Corrupt/useless dysfunctional ANC led Government

We’re all born free and taxed to death..
Our money has seen high end commodities, from fancy cars, expensive homes, expensive Whiskey to watches
sky rocket since the comrades came into power

They’ve taught us the real meaning of “distribution of wealth” Don’t steal from the rich, steal the GDP, thats even more alluring

Is it legal to give money to thieves, or is it just the way it is done on this continent.

It irks me to give money to a cause that is going to either steal, waste or just throw it away. Does a persons moral compass not want to give to a good cause??? Boystown or the NSPCA.

Some of the outcomes sound unintended and stupid.

That thing with inheritances needing the kid to register is stupid as there is not even a tax involved.

How do regulators focus on stuff like that, but they let slide that a South African that benefited from 35y of RA deductions locally, then emigrates, does not pay SA tax on the RA benefits flowing to Mauritius? That is plain offensive. Good lobbyists for the RA industry, bad lobbyists for the estate industry?

They need to shuffle some kind of paperwork to justify their inflated salaries.

I love the way us post-colonials follow all these Byzantine rules to manage our affairs and in effect pay for the pre-colonials, to whom the Rule of Law simply doesn’t apply. Flog your property, buy an Irma Stern, get on the airy, drink chardonnay If our leaders don’t obey the law, why should we? I have a very ‘Zim’ mindset these days.

There are two sets of laws in this country, one is a very thick book, the other barely covers the first page…….like a Biafran Cookbook.

Let’s be honest, many of us have got to the point (of ‘gatvol’) where we just want nothing to do with this country anywhere. Tax in South Africa is not ‘tax’ as we know it but rather a forced payment in support of incompetence and criminality and then it is also used to viciously discriminate against you (as a minority). It may be the ‘law’ but it is an injustice.

Quite true & feel the same.

I wonder how far separated the implied role of the state has become, versus what govt should be doing, before citizens can call it “a break in the social contract” between taxpayer and govt.

There are no just laws left here. We have already descended into anarchy. In government, in municipalities, in the economy, on the roads, and in our laughable police stations.

Might as well go all the way and completely ignore the organized criminals who spend their days trying to steal more and more from us.

taxpayersunion dot co dot za, News and Projects.

Just think, high level, how ridiculous it is that in the “modern age” you need to jump through hoops to get your own/your family’s wealth transferred to a place you’ll need it.

But no, we give government (& this isn’t unique to SA) so much power over us.

Since when was government the be-all-&-end-all of how best we spend our money and wealth?

End of comments.

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