In a bid to meet its tax revenue quotas, SARS began introducing changes to the expatriate laws which took effect on 1 March 2020, which saw the launch of the Foreign Employment Unit. Now, exactly one year later, stricter laws will be coming into effect from 1 March 2021.
Although the new process is still undisclosed, the changes are expected to make it more difficult for South African expatriates living and earning abroad to cease their tax residency to the country. While a cloud of fog conceals the details of the coming changes, SARS has begun auditing expats and as a result, many South Africans have been frightened into ceasing their tax residency before the deadline.
If you are intending to relocate, the best way forward would be to ensure that your taxes are in order and follow the formal exit procedure by way of financial emigration by March 2021. This will ensure that you will be processed under the current legislation and not the incoming tax laws. Financial emigration, like all things in life, will come at a cost. Successful financial emigration means that you will terminate your tax residency with SARS, which will, in turn, mean that the South African Reserve Bank will no longer be able to view your status as an exchange control resident. If you successfully cease your tax residency in South Africa, your access to South African bank accounts and credit services may be affected as you will be viewed as a non-resident. This option should only be considered if you are certain that you won’t be returning to SA. So be sure to think this option through carefully and thoroughly before committing to financial emigration.
If you have a pension or provident fund and decide to cash out these funds before the legal retirement age, you are permitted to withdraw all of your funds. However, this may mean that you will be obligated to pay tax for the pre-retirement withdrawal.
If you have already relocated, you could potentially seek relief through a double tax agreement between the country you’ve relocated to and South Africa. These agreements vary from country to country and in some cases, the double tax agreement does not apply in certain countries. So be sure to do some research to see if this option could apply to you.
If you have not yet settled your taxes in SA before relocating, it would be best to apply for the Voluntary Disclosure Programme. This will allow you to pay your outstanding taxes with interest and penalties but it will protect you from prosecution.
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