An analysis of ceasing to be tax resident in South Africa

Abstract

Since the announcement of the change in the foreign employment exemption in the National Budget in 2017, and the increase in the global networking, as well as political uncertainty in South Africa, many South Africans have left the country, either on a temporary or permanent basis, to start a new life somewhere else. The implications of leaving South Africa permanently, is a decision that will affect a person, both practically, and from a tax and exchange control perspective. The facts and circumstances for each person exiting South Africa need to be addressed on a case by case basis to determine how he will be affected from a tax and exchange control point of view. SARS has a comprehensive set of residency rules that need to be applied from a tax perspective and there is international case law and double tax agreements that need to be examined in order to determine a person's tax position. From an exchange control perspective further rules and regulations exist where a person wish to exit from South Africa permanently and extract their remaining assets from South Africa in the most productive way possible. Emigrating from an exchange control perspective will also affect any future transactions taking place when that person wishes to transact with South Africa in the case of investment and receiving an inheritance. In comparing the tax legislation and exchange control restrictions in South Africa to that of India and Russia sought to determine the similarities the three countries may exhibit. All three countries being regarding as developing nations with large numbers of persons exiting their country of origin to relocate to other parts of the world. In making the comparison between South Africa, Russia and India it can be seen that South Africa has a more advanced set of rules surrounding the breaking of tax residency that can be used as guide by Russia and India in protecting the extent of their tax revenue leaving their shores on emigration. From a domestic perspective, it could be recommended that SARS implement a practical system in order to monitor the change of taxpayer's residency to help align the legislation with the practical implementation and the interaction between SARS and the SARB. South Africa has a firm set of legal guidelines and interpretation surrounding the ceasing to be resident. The practical application of the law, however, does not always align with the legislation.