In the wake of the global skills shortage, South Africans are finding themselves in high demand globally, prompting many to contemplate a life abroad. However, this decision demands careful consideration and necessitates a meticulously planned roadmap and exit strategy. 

As a growing number of individuals embark on this international adventure, the heightened focus of the South African Revenue Service (“SARS”) on offshore assets and foreign income disclosure has fuelled concerns among those lacking a well-defined exit strategy. Beyond choosing the perfect destination and timing for relocation, comprehensive tax and financial planning are crucial elements in minimising uncertainty and anxiety.

Crafting a clear roadmap and strategy empowers those potentially making the big move with a full and clear understanding of their options, along with the associated the risks and benefits. 

Strategic Planning for the Future

When to move

For South Africans eyeing a life abroad, the question of when to make the move is often just as pivotal as the question of where to go. Given that South Africa’s tax year spans from 01 March to the end of February each year, the timing of your relocation will determine the tax year impacted by your exit. 

Severing tax ties

The Income Tax Act, No. 58 of 1962 defines a tax resident as an individual who is “ordinarily resident” in South Africa. Where the individual has already formalised their non-residency on this basis, they could become a tax resident again in terms of the “physically present” test, which looks at the time they spend in South Africa.  

A clear roadmap aids in navigating the question of tax residency, cessation, and relevant exemptions. By preparing for potential obstacles and challenges, individuals gain insight into various options such as offshore investment, purchasing properties abroad, and setting up companies and offshore trusts. 

Transition of wealth 

Oft-forgotten complexities arise in relation to the transfer of wealth out of South Africa when one ceases to be a tax resident. Central to this is the Approval International Transfer (AIT) Tax Compliance Status PIN generally required by SARS to obtain permission for foreign remittances. For these reasons, one’s roadmap should also incorporate strategic planning for remitting funds offshore and structuring them abroad optimally. 

Navigating fund remittances without proper guidance may result in obstacles and SARS rejections, impacting emigration planning adversely and, at times, indefinitely.

A Clean Break for Closure

A common stumbling block is the uncertainty surrounding when and how to formalise the cessation of one’s residency status, often leading to misguided decisions and naivete in taking incorrect advice. A comprehensive roadmap ensures individuals and their families have a clear plan of action to follow, alleviating uncertainty or anxiety associated with such a big move. This allows a focus on the positive aspects, make the transition as stress-free as possible for you and your loved ones.

At the heart of this roadmap is a trusted advisor, providing guidance in closing any South African affairs seamlessly.

Written by Roxanna Naidoo, Global Partner and Client Engagement, Admitted Attorney at Tax Consulting SA