Tax Matters

12th August 2012

And these days an increasing number of both young and older folk from foreign shores also look to make new homes on the Garden Route. Foreigners face additional challenges that do not apply to local transferees, and this article focuses in particular on the tax implications faced by foreigners who want to become SA residents.

Other than taxation considerations, immigrants need to consider our government's requirements before issuing a residence permit. If you are still in the early phase of your planned move, a useful starting point is the website to get a basic understanding of the department's prerequisites.
Another consideration is our exchange control requirements - any local bank should be able to provide basic information in this regard. However, it is worth mentioning that these regulations are reasonably favourable for immigrants.

With regard to taxation, in my experience a lack of knowledge or poor advice in this area often puts potential immigrants off relocating, and it's worth spending a bit of time clearing up certain misconceptions.

Firstly, South Africa has a residence-based tax system. If you are a South African tax resident, you are subject to tax on your worldwide income, but how you are taxed and which income types are taxable are subject to certain rules and bilateral agreements.

These rules can be fairly complex and are beyond the scope of this article, but two important points are worth mentioning. The first concerns retired immigrants and is the fact that, subject to certain rules, pensions from other countries that arose from employment outside SA, are not taxable in SA.

Secondly, if the income has already been taxed in the foreign country there are rules to avoid or limit the effect of double taxation.

But who is a resident, for tax purposes? This is defined in the Tax Act and is not dependant on other definitions of resident. It starts off defining a resident as "a natural person who is i) ordinarily resident in the Republic: or..." and then goes on to specify rules regarding actual time spent in the country.

This is an area that our Plett 'swallows' need to be aware of because they could quite innocently and unintentionally become tax residents based purely on the amount of time they spend in SA.

If a person exceeds the periods specified in the act then they may well find themselves being subject to local tax. If you do, or plan to spend lengthy periods in South Africa, it is advisable that you familiarise yourself with these rules.
The term 'ordinarily resident' is also problematic as it is subjective, e.g. a person who spends less than the specified periods in the country might be ordinarily resident under certain circumstances.

This is a very brief overview of complex rules so if in any doubt regarding your status, do consult a qualified person.
It is also advisable to have your tax position analysed because becoming a tax resident does not automatically mean you will pay more tax. It is highly likely that similar tax residence rules apply in your country of origin and you might well cease to be a tax resident in your own country.

Don't be put off making the move before having your situation scrutinised to see if the tax implications are as onerous as expected - you might well be pleasantly surprised.

Email Jeremy or Sean at for further information.

Author: Jeremy Andrews CA (SA) - Andrews O'Connell Chartered Accountants for CXPRESS

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