2020 has made many of us reassess our lives and how we live them. Whether this is how we work, how our families operate or where we want to live – no doubt there are going to be significant repercussions once this pandemic draws to a close, as people choose to restructure their lives. For this reason, emigration is a very hot topic right now. But there is much ongoing debate and uncertainty regarding making this decision, whether you’re considering emigrating for tax and/or exchange control purposes.
Moving your family and belongings are a part of this decision but it’s not as simple as that - the decision to emigrate is multi-faceted, as it includes the very important aspect of what to do with your financial affairs as well.
Here are a couple of suggestions to bear in mind, so you can get the result you’re looking for:
- Make your life decision first: Don’t make decisions regarding how or where you’re going to live based on tax or fiscal considerations. Decide where you want to be and then manage the finances to fit in with those decisions. The tail shouldn’t wag the dog.
- Try and keep exchange control and tax separate: They are different regulatory regimes, have different tests which are applied and have different regulators – they should not be combined. Trying to deal with both of these as one concept just leads to confusion.
- Keep it simple: If you keep each of the issues distinct from the other and take the appropriate advice for each, the steps to be followed are usually simple. Don’t panic, plan and ask for help where needed.
- Exit tax return: The tax emigration process is relatively simple. When you complete your return in the year of emigration, there is a specific question as to whether or not you have ceased to be a resident during the year. Tick “yes” to that and all of the necessary information fields will come up automatically. Take tax advice if you need to.
- When do I emigrate for tax purposes? Again, there is a simple principle which governs this decision, but which then needs to be applied to a number of more complex circumstances. If you are leaving South Africa permanently (excluding visits from time to time), AND you have the right to live abroad, AND you are going to go and make a new life in a new destination, it is quite clear that you are emigrating. Remember however that emigration isn’t a choice, so if you are planning to stay in SA for any substantial period or purpose, take advice as to whether or not you have actually emigrated.
- Exchange control: Exchange control as mentioned in the budget of 2020, is going to be largely withdrawn. It’s worth waiting for the new regulations, which should be out at the end of this year or early in Q1 2021. The removal of exchange controls should make the immigration process from an exchange control perspective substantially simpler.
- Investment allowances: Most people can comfortably take out all of their personal wealth using the investment allowance of R11 million, per person, per annum. It’s relatively easy to do. That’s R20 million per couple so, by early January 2021, you could have taken R40 million overseas. Bear this in mind in your planning and get in contact with your commercial bank who will help you through the process.
We hope that these few points give you something to think about while you are making this important life decision. If you need tax advice on emigration, please contact your legal advisor.