Mar 2, 2021
Financial emigration is the process used by many South Africans abroad to formalise their non-resident status for both tax and exchange control purposes, and which is set to be amended, as mentioned a year ago in Budget 2020, and came into effect on 1 March 2021.
By Jonty Leon, legal manager: expatriate tax at Tax Consulting South Africa
Since the initial announcement, there has been zero public consultation, draft Regulations or anything else publicly released, on exactly what the new process will look like. However, finally the South African Reserve Bank (SARB) has released its comments to authorised dealers on how the new regime will commence.
South Africa’s financial emigration system has changed – here are the new rules
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In its 2021 national budget, Treasury said that amended rules around financial emigration are set to come into effect from 1 March 2021.
Financial emigration is the process used by many South Africans abroad to formalise their non-resident status for both tax and exchange control purposes.
“Since the initial announcement, there has been zero public consultation, draft Regulations or anything else publicly released on exactly what the new process will look like,” says Jonty Leon, legal manager at Tax Consulting South Africa.
“However, finally the South African Reserve Bank (SARB) has released its comments to authorised dealers on how the new regime will commence.”
Government investigating wealth tax for South Africa – what to expect
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While no ‘solidarity tax’ was announced by Finance minister Tito Mboweni in his 2021 Budget Speech, National Treasury has indicated that it will assess the viability of a future wealth tax as it collects more data in the coming months.
“Following the recommendations of the Davis Tax Committee, SARS will focus on consolidating wealth data for taxpayers through third-party information,” Treasury said in its 2021 budget review.
“This will assist in broadening the tax base, improving tax compliance and assessing the feasibility of a wealth tax.”
From the comments made in the 2021 Budget Speech, it does not appear that South Africa will see the introduction of a wealth tax in 2022, said Roxanna Naidoo, attorney at Tax Consulting South Africa.
R3 billion investment into SARS is a big warning to taxpayers in South Africa
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The South African Revenue Service (SARS) will be allocated R3 billion to upgrade its technology and infrastructure systems, and expand its specialised audit and investigative skills to prevent tax avoidance in the country.
“In this coming fiscal year, SARS will establish a dedicated unit to improve compliance of individuals with wealth and complex financial arrangements,” said finance minister Tito Mboweni, during his 2021 annual budget speech in Parliament on Wednesday (25 February).
“This first group of taxpayers have been identified and will receive communication during April 2021. In support of these efforts, we request that this house approve an additional spending allocation to SARS of R3 billion over the medium-term.”
Change coming in March could have a major impact on South Africa’s tax base: analyst
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The financial emigration law amendment that comes into effect on 1 March could cause a mass exodus of South Africa’s tax base, says Professor Jannie Rossouw, head of Wits Business School.
In an interview with the
Citizen, Rossouw said it will primarily be young, skilled people who already work remotely for international companies who will emigrate.
“They will just move to a new place and continue their work, which means that they will not leave a vacancy behind that needs to be filled,” he said.