Back in 2017, the National Treasury and SARS announced that they would be introducing major changes in the tax exemption on South African expatriates in 2020.

Since then, that’s pretty much all anyone in the tax world can talk about, especially now that we know that the proposed legislative amendment will come into effect on March 1, 2020, which is not that far away.

There are a number of reasons why people aren’t happy about the new law, reports IOL.

For one thing, South African tax residents abroad will be required to pay tax, to SARS, of up to 45% of their foreign employment income, where it exceeds the R1 million mark.

There’s also the chance that the new amendment could have a negative impact on the South African economy.

To help you prepare for the inevitable, here’s everything you need to know moving forward.

When determining whether or not you are subject to income tax in South Africa as an expat, SARS will look into the following:

Ordinary Residence: this is determined on an individual basis and is not formally defined in the Income Tax Act. Your ordinary residence refers to where you intend to live, and whether or not you plan on sustaining property in South Africa.

Even if you are not maintaining a residence in South Africa, any assets or family that remain in the country will be taken into consideration. In other words, you have to prove that you have absolutely no intention of returning to SA to be exempt from expat tax.

Financial emigration: Financial emigration is a necessary step when relocating to another country or continent. It acts as a declaration to the Reserve Bank that you have effectively given up your tax residency in South Africa.

It does not, however, mean that you have given up tax residency in South Africa, but SARS will take it into consideration when determining your tax status.

Physical presence test: One of the ways that SARS will determine whether or not you should be exempt from expat tax is by determining the number of days that the taxpayer is physically present in South Africa over a period of five years exceeding:

• (i) 91 days in aggregate during the year of assessment under consideration;
• (ii) 91 days in aggregate during each of the five years of assessment preceding the year of assessment under consideration;
• (iii) 915 days in aggregate during the five preceding years of assessment.

If you comply with the above, you are considered a resident of the Republic and therefore have to pay tax.

You cease to be a tax resident if you remain out of the country for an uninterrupted period of at least 330 full days.

If all of this is sounding complicated that’s because – to be frank – it is. Expat tax is tricky business.

If you’re smart, you’ll stop doing the math in your head and hand your tax concerns over to an expert.

Galbraith | Rushby offer professional tax compliance and advisory services to individuals and businesses.

Let them handle all things tax-related, leaving you to focus on the move, settling in, and exploring your new home.

With all the uncertainty out there, you don’t want to take the risk of running this one alone.

[source:iol]