South Africa’s so-called brain drain continues, with stats from October 2020 showing a 70% increase in enquiries over the course of the previous two years on the process of relocating, with a focus on New Zealand, Australia and the UK.
More recently, Stats SA revealed that white South Africans are leaving the country in large numbers, even during COVID-19, which makes packing up and leaving all the more complicated.
Wrapping up one’s financial affairs without the assistance of tax experts can be a headache, and the National Treasury has now proposed a further tax on South Africans who intend to emigrate permanently, as part of the recently published Draft Tax Bills.
It’s been dubbed ‘exit tax’ by some tax practitioners and would have a serious impact on those whose retirement plans involve moving abroad.
This via Moneyweb:
To prevent retirement interests from escaping taxation in SA after a person ceases residency, it is proposed that an individual will be deemed to have withdrawn from their retirement fund on the day before they cease residency, triggering a South African tax liability.
In effect, it proposed to impose an exit charge on retirement interests, in addition to the existing exit tax that finds application when a person ceases residency.
This way, SARS doesn’t lose the right to tax retirement interests when they are withdrawn after a person ceases residency but prior to retirement.
The only respite is that while the tax is triggered as the person ceases residency, payment is only required when the amount is received from the retirement fund.
Still, it’s certainly thrown a curveball into the mix, reports BusinessTech:
Due to come into operation on 1 March 2022, this proposed amendment would be a further blow to South Africans wanting to cease their tax residency, following on from the three-year lock-in rule imposed on retirement annuities earlier this year…
“What [government] fails to recognise is the burden of the unknown rate of the future lump sum tax tables that the actual payment would be made on,” Tax Consulting SA said.
With the Draft Tax Bills now public, submissions opposing the amendment must be put through by August 28.
It’s advised that any South Africans who were planning on emigrating, or even considering it, speak with their advisors.
Cape Town-based tax experts Galbraith | Rushby are also on hand to offer advice on all matters tax-related.
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