[ad_1]
The financial migration process, which is the process that allows a taxpayer to formally register as a non-resident for tax purposes with the South African Revenue Service (SARS), recently changed and came into effect on March 1, 2021.
Jonty Leon, Legal Manager (Expat Tax) at Tax Consulting South Africa, said the company has seen an increased volume of inquiries about the benefits of financial migration, the new process, as well as the timelines involved in financial migration.
“The advantage of financial migration is that it allows you to cleanly cease SA’s tax residence, ensuring that its foreign income and assets are protected outside the SARS jurisdiction. Financial migration used to be a tax and exchange control process, but the new process means that financial migration has become solely a tax process.
“The exchange control process created an additional set of administrative challenges with financial institutions, which is no longer the case. Under the new financial emigration regime, there are no disadvantages for those who intend to reside outside the country permanently, ”said León.
In-depth audits and accreditation of non-residence
As SARS will no longer be able to tax an individual on their worldwide income and assets once SA’s tax residence has ceased, the institution has increased its collection power to ensure that the taxpayer has actually met the requirements for cease tax residence. This translates into deeper SARS audits to ensure these taxpayers meet the non-residency criteria.
“For many years, South Africans abroad have gone unnoticed. Many expats still feel that they are no longer required to pay taxes in South Africa if they have been abroad for many years.
“It is important to note that the process is not automatic and the burden of proof always falls on the taxpayer. SARS now has a team dedicated to investigating and recovering taxes from South Africans abroad who have not ceased their tax residence in South Africa, ”said Leon.
Steps involved in financial migration
The person seeking to emigrate economically must be fully up to date and comply with SARS. This compliance extends to any South African trust or company to which they are linked, which must also be fully up-to-date and compliant.
The taxpayer must then pass two tests to determine tax residence outside of South Africa, namely the physical presence test and the habitual resident test.
After this, they can submit an application with the complete supporting documentation to SARS for a Certificate of Settlement of Emigration Taxes.
The application will include an “exit tax” that is calculated on certain assets worldwide, as well as a statement of all South African assets and liabilities. Only once this has been audited and approved by SARS can the taxpayer be considered a non-resident for tax purposes.
“Taxpayers must follow the most transparent formal route to migrate financially to ensure that a taxpayer can overcome the burden of proof by ceasing to reside for tax purposes.”
Read: Crypto Investors Could Be The ‘Canary In The Coal Mine’ For Taxes In South Africa
[ad_2]
