The new Financial Emigration process has now come into effect as of 1 March 2021, and your retirement money is subject to a lock-in period of three years, meaning you are not allowed to touch it or best apply it to your personal circumstances. Therefore, South Africans who have moved abroad or plan to permanently leave South Africa have to financially emigrate with tougher exit rules under the “three-year lock-up” dispensation.
On Tuesday 13 October 2020 in Parliament, National Treasury (“Treasury”) and SARS presented to the Standing Committee on Finance on a number of proposed amendments to legislation, which amongst others, would directly affect South Africans who have already moved abroad, or are planning on moving abroad. The feedback to stakeholders, specifically around the withdrawal of retirement funds upon financial emigration, was certainly one which was foreseen after it was proposed in the draft Taxation Laws Amendment Bill (“TLAB”) in July 2020.
Why is this bad?
Many South Africans abroad have formalised their non-resident tax status through Financial Emigration, and this process has now proven to be a thorn in SARS and National Treasury’s side. The change to the emigration rules, which came into effect 1 March 2021, is a desperate bid to stem the tide of South Africans making up their mind to ‘divorce’ South Africa fiscally through Financial Emigration. This means SARS will aggressively target expats as an untapped pool of potential revenue, exposing your offshore trusts, foreign income streams and other assets held abroad.
How will SARS find me?
Under existing international standards, South Africa participates in the automatic sharing of information between tax authorities on individuals’ financial accounts and investments. Government expressly stated during the 2021 Budget Speech that these cooperative practices will remain in place to ensure that South African tax residents who have offshore income and investments pay the appropriate level of tax.
What are the next steps to “avoid” the Expat Tax?
The Financial Emigration process has been extremely successful for South Africans to cut tax ties, and as such, SARS has made it more difficult to cease tax residency by amending the process effective 1 March 2021.
We have an in-depth understanding of the new process and can help you complete your Financial Emigration and guarantee non-tax residency through SARS. This will provide you with protection from #ExpatTax2021 and ensure your foreign earned income remains tax-exempt in South Africa.
Now is the time to comply with formalities and ensure your worldwide income is not liable for South African tax.
When your Financial Emigration is successfully completed through our company, we guarantee non-tax residency on record with SARS and SARB.
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