SOUTH AFRICA TAX FREQUENTLY ASKED QUESTIONS
WHAT ARE THE REQUIREMENTS TO DE-REGISTER AS A SOUTH AFRICAN TAXPAYER BASED ON OUR ABOVE SCENARIO? DO YOU FIRST HAVE TO BECOME A TAX RESIDENT IN MAURITIUS BEFORE YOU CAN DE-REGISTER AS A SOUTH AFRICAN TAX PAYER?
To deregister as a taxpayer in South Africa, one needs to first of all have no income whatsoever being generated (worldwide income if a tax resident of SA). However, if one has ceased tax residency in SA, and has no income or assets in SA one can then also deregister from tax. The point here is that one would only deregister if they have no income currently, or expected in the future (for instance the sale of a property in SA) that would need to be declared on a tax return. Thus, often the deregistration for tax is less important, because one may hold a bank account in SA for instance that generates interest income, and this would need to be declared. More importantly would be to ensure that SARS has one’s correct residency status on file ie. Resident/non-resident taxpayer, as this will determine what needs to be declared to SARS and what will be taxable.
IS THE MONEY THAT I WIRE TO MY SA BANK ACCOUNT CONSIDERED AS A TAXABLE INCOME? DO I STILL GET TAX BENEFITS FOR MY RA?
WHAT ARE THE REQUIREMENTS TO DE-REGISTER AS A SOUTH AFRICAN TAXPAYER BASED ON OUR ABOVE SCENARIO? DO YOU FIRST HAVE TO BECOME A TAX RESIDENT IN MAURITIUS BEFORE YOU CAN DE-REGISTER AS A SOUTH AFRICAN TAX PAYER?
IS THE MONEY THAT I WIRE TO MY SA BANK ACCOUNT CONSIDERED AS A TAXABLE INCOME? DO I STILL GET TAX BENEFITS FOR MY RA?
To deregister as a taxpayer in South Africa, one needs to first of all have no income whatsoever being generated (worldwide income if a tax resident of SA). However, if one has ceased tax residency in SA, and has no income or assets in SA one can then also deregister from tax. The point here is that one would only deregister if they have no income currently, or expected in the future (for instance the sale of a property in SA) that would need to be declared on a tax return. Thus, often the deregistration for tax is less important, because one may hold a bank account in SA for instance that generates interest income, and this would need to be declared. More importantly would be to ensure that SARS has one’s correct residency status on file ie. Resident/non-resident taxpayer, as this will determine what needs to be declared to SARS and what will be taxable.
If you are a non-resident for tax purposes of SA and you wire funds from Mauritius to SA which funds were earned from a source outside of SA, those funds will not be taxable in SA. However, any growth of those funds in South Africa or invested in an asset within SA would likely be taxable in SA. One would need to determine if they are also tax resident of Mauritius, and the Double Taxation Agreement would likely give relief hereon to ensure the funds are not taxed twice. I would strongly recommend that you have a conversation with a specialist to break down the various components at play here some of which might need the input of an SA expert.
IF WE RELOCATE TO MAURITIUS, WOULD WE QUALIFY TO PAY THE 15% TAX AND BE ABLE TO DEREGISTER AS A TAX PAYER WITH SARS? WHAT ARE THE CRITERIA TO BE ABLE TO DO THIS?
The simple answer is yes this is possible. However, you need to ensure that you exit South Africa’s tax base and become a non-resident for tax purposes first, and thereafter if you have no income or assets in SA you can deregister for tax in SA. Each individual’s situation must be taken into account as this will guide what is possible and what is not.
ARE THERE ANY TAX TREATY'S BETWEEN SA & MAURITIUS?
IF WE RELOCATE TO MAURITIUS, WOULD WE QUALIFY TO PAY THE 15% TAX AND BE ABLE TO DEREGISTER AS A TAX PAYER WITH SARS? WHAT ARE THE CRITERIA TO BE ABLE TO DO THIS?
ARE THERE ANY TAX TREATY'S BETWEEN SA & MAURITIUS?
The simple answer is yes this is possible. However, you need to ensure that you exit South Africa’s tax base and become a non-resident for tax purposes first, and thereafter if you have no income or assets in SA you can deregister for tax in SA. Each individual’s situation must be taken into account as this will guide what is possible and what is not.
Yes, South Africa and Mauritius have a Double Taxation Agreement in place.
SHOULD THE SARB DECIDE TO DO AWAY WITH FORMAL EMIGRATION FROM NEXT YEAR, WILL IT STILL BE POSSIBLE TO TAKE ALL YOUR ASSETS OUT OF SOUTH AFRICA AT ONCE OR WILL YOU HAVE TO USE THE YEARLY OFFSHORE ALLOWANCE?
SARB is set to phase out the exchange control portion of financial emigration next year, and in doing so strengthen the tax treatment of the financial emigration process making it more difficult to exit from a tax perspective. At this point, no indication has been made that SARB would not allow one to remove all income and assets from SA as long as the formal processes (which are set to change) are followed correctly.
WHAT IF YOUR TAX RESIDENCY CHANGES MID-YEAR? CAN YOU FINANCIALLY EMIGRATE MID-YEAR? IS TAX PRO-RATA’D FOR THAT YEAR OR HOW IS IT HANDLED?
SHOULD THE SARB DECIDE TO DO AWAY WITH FORMAL EMIGRATION FROM NEXT YEAR, WILL IT STILL BE POSSIBLE TO TAKE ALL YOUR ASSETS OUT OF SOUTH AFRICA AT ONCE OR WILL YOU HAVE TO USE THE YEARLY OFFSHORE ALLOWANCE?
WHAT IF YOUR TAX RESIDENCY CHANGES MID-YEAR? CAN YOU FINANCIALLY EMIGRATE MID-YEAR? IS TAX PRO-RATA’D FOR THAT YEAR OR HOW IS IT HANDLED?
SARB is set to phase out the exchange control portion of financial emigration next year, and in doing so strengthen the tax treatment of the financial emigration process making it more difficult to exit from a tax perspective. At this point, no indication has been made that SARB would not allow one to remove all income and assets from SA as long as the formal processes (which are set to change) are followed correctly.
One can cease residency at any point as long as they no longer meet the requirements of the South African tax residency tests. This means that one can financially emigrate mid-year. From the point of ceasing tax residency, you will only be taxable on SA sourced income and assets, and thus income earned outside of SA from that point onwards would not be taxable in SA (nor would one need to declare it on their tax return).
WHERE IS THE RENTAL INCOME TAXED IF A SOUTH AFRICAN BUYS PROPERTY IN MAURITIUS?
Almost always, rental from fixed property will be taxable in the country in which the property is located. The difference comes in where one needs to determine where this income must be declared, and the tools to ensure that it is not double taxed in both jurisdictions. If one ceases tax residency of South Africa, the rental income earned in Mauritius will not need to be declared in SA and there will be no tax liability in SA.
WITH REGARDS TO FINANCIAL EMIGRATION: MY HUSBAND WILL GO TO MAURITIUS AHEAD OF ME, AS I NEED TO STAY IN SA FOR ANOTHER 12 MONTHS TO TAKE CARE OF LOOSE ENDS. I WILL VISIT MAURITIUS DURING THIS TIME, ON AND OFF. WILL MY HUSBAND BE "PENALISED" IN TERMS OF "BREAKING TIES" WITH SA DUE TO ME NOT BEING OUT OF SA WITH HIM PERMANENTLY?
WHERE IS THE RENTAL INCOME TAXED IF A SOUTH AFRICAN BUYS PROPERTY IN MAURITIUS?
WITH REGARDS TO FINANCIAL EMIGRATION: MY HUSBAND WILL GO TO MAURITIUS AHEAD OF ME, AS I NEED TO STAY IN SA FOR ANOTHER 12 MONTHS TO TAKE CARE OF LOOSE ENDS. I WILL VISIT MAURITIUS DURING THIS TIME, ON AND OFF. WILL MY HUSBAND BE "PENALISED" IN TERMS OF "BREAKING TIES" WITH SA DUE TO ME NOT BEING OUT OF SA WITH HIM PERMANENTLY?
Almost always, rental from fixed property will be taxable in the country in which the property is located. The difference comes in where one needs to determine where this income must be declared, and the tools to ensure that it is not double taxed in both jurisdictions. If one ceases tax residency of South Africa, the rental income earned in Mauritius will not need to be declared in SA and there will be no tax liability in SA.
There are a couple of factors that need to be taken into consideration.