Exit tax: Detrimental or fascinating?
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Exit tax: Detrimental or fascinating?

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When pursuing worldwide profession progress, and offshore employment, bear in mind that transferring your particular person, with out the requisite paperwork, can have you scoring bonuses in Belgium however nonetheless topic to Sars in South Africa. With the intention to guarantee optimum taxation, South Africans overseas should make use of both the Double Tax Settlement or the monetary emigration course of to formally stop their tax residency in South Africa.

Each processes serve to stop Sars from taxing overseas revenue, with both a everlasting or momentary intention being the differentiating issue. It have to be famous, nonetheless, that each choices entice the dreaded exit tax.

What’s exit tax?

With out understanding the intricacies, South Africans overseas typically attempt to keep away from this exit tax by rolling the cube and never ceasing their tax residency. That is an instantaneous purple flag, and when down in your luck, can open you as much as the chance of a possible Sars’s audit. The audit is keenly centered on of the expat’s monetary place after their departure from South Africa, nonetheless past that, there stays a lot confusion available in the market as to exit tax and the way/when it applies.

Many South African expats worry exit tax as they imagine that Sars is ready to tax all their property once they arrive at OR Tambo airport; fairly merely put, that is incorrect.

Exit is a once-off, deemed capital positive aspects tax (CGT) on particular worldwide property of an outbound expat. This deemed CGT is mainly a “fictitious sale”. From a sensible standpoint, Sars claims tax on sure property of an emigrant as if they’d been bought the day earlier than the expat ceased to be tax resident in South Africa; that is, most of the time, the day earlier than the expat leaves South Africa.

An instance of Sars requesting proof of CGT calculation as a part of the exit tax to show one’s non-tax residency in South Africa

Which property shall be topic to exit tax?

Though not a closed record, the most typical circumstances of the place Sars will maintain its hand out for the exit tax are the under property:

  • Immovable property located exterior of South Africa;
  • Krugerrands;
  • Crypto property;
  • International shares;
  • International unit belief investments; and
  • Being a beneficiary and/or trustee of sure trusts the place the taxpayer has a vested proper.

The excellent news for South Africans proactively optimising their taxes by way of both the applying of Double Tax Settlement or the monetary emigration course of is that sure property won’t fall into the exit tax internet. Excluded property embrace immovable property in South Africa, money, and retirement funds. There are additionally exemptions resembling an annual R40 000 CGT exclusion which can be claimed.

Optimising taxation with offshore employment

When the proper tax technique is adopted, South Africans overseas ceasing tax residency acquire a primary mover benefit, discovering that following both the Double Tax Settlement or Monetary Emigration course of, could end in little, or in some situations, no, “exit tax” being due.

Nonetheless, the place dealt a hand of monetary detriment now, ripping off the exit tax band-aid will permit long-term tax financial savings, actively stopping the double-taxation of future overseas revenue.

Be it your intention to formally to migrate or just spend a while overseas, accurately ceasing your South African tax residency will present peace of thoughts, figuring out you might be compliant, ought to Sars’s audit radar ever come round.

Loyiso Bavuma is a tax lawyer and Richan Schwellnus is a tax affiliate at Tax Consulting South Africa.