Great Escape – Your Climate Change Survival Plan

Great Escape – Your Climate Change Survival Plan

Unless you’ve booked passage to Mars, it’s time to consider the unimaginable

Written by Starre Julia Vartan – https://medium.com/@thecurioushuman

Three-quarters of the world’s megacities sprawl seaside. More than 40 percent of Americans live in oceanside counties. The National Oceanic and Atmospheric Administration projects that number will increase, even while the seas rise an estimated 20 feet over the next 80 years. Efforts to erect sea walls and implement massive pumping systems are underway in some locales, but even with those measures in place, tens of millions of people will be displaced.

Where will they all go? Most will go inland, of course, and maybe a few will join Elon Musk on Mars. But increasingly, technologists are envisioning off-land human societies—on the water, underwater, and in the air—and they’re developing the technologies that will allow it to happen.

None of this is to downplay the havoc being caused by climate change (or to suggest we should be less diligent about mitigating it), but as legendary sci-fi author Kim Stanley Robinson, whose recent novel New York, 2140 depicts a permanently flooded but still-vibrant Manhattan, says, “It’s important to stay positive about the future, no matter how messed up things are now.”

In that spirit, here’s a look at the new communities we can — and may have to — create.
Seasteading

In January 2017, a startup called Blue Frontiers made an agreement with French Polynesia, a nation that may lose a third of its islands to rising seas by the end of the century. The deal called for the company to build an artificial island (aka a seastead) hosting 300 homes, setting aside 25 percent of the spaces for Polynesians and creating what Blue Frontiers calls “the world’s first environmentally restorative community.”

That’s more than just a nod at sustainability — part of the seastead design process considers the local ecosystem and works toward minimizing environmental impacts, with rainwater harvesting, seabed monitoring, built-in composting, and, of course, renewable energy to power it all.

“Seasteads could be the technology for startup societies. It’s a Silicon Valley sensibility brought to the problem of governance that doesn’t get any better.”

What will this community look like? Picture a connected set of floating platforms, each of which supports a house or group of houses with balconies galore, connected by bridges and walkways and topped with green roofs.

Seasteading as a concept is still in its early stages, and working with existing countries are part of what Joe Quirk, president of the Seasteading Institute, a nonprofit think tank whose research inspired the Blue Frontiers project, calls “strategic incrementalism towards autonomy.” In time, he hopes the developments will become independent nation-states, with systems of governance left up to the people who found them. “Seasteads could be the technology for startup societies,” Quirk says. “It’s a Silicon Valley sensibility brought to the problem of governance that doesn’t get any better.” (That’s certainly how they’re hoping to fund the pilot project. The public presale of Varyon, a cryptocurrency to fund Blue Frontiers, ended on July 14.)

Right now, the technology exists for building a floating city in shallow waters, but what about a new mid-ocean community completely cut off from both an existing landmass and a sovereign government? “The fundamental challenge with [seasteading on] the high seas is waves, and the cost of stability in waves,” Quirk says. “The technology is available, but it’s expensive.”
Floating Pavilion, Rotterdam, Netherlands. Photo: Xavier TESTELIN/Getty

At present, that technology takes the form of the Floating Pavilion in Rotterdam, built by Dutch engineers to show how floating architecture works, as well as oil platforms and the Office of Naval Research’s Floating Instrument Platform (FLIP). The interiors of the FLIP rotate, and the vessel literally flips from horizontal to vertical to keep everything remarkably stable, even in 40-foot waves. This idea could be updated to allow for mid-ocean seasteading.

To be independent, any future ocean-based society will need to harness resources in order to maintain the technology keeping it afloat. That’s where Blue Revolution Hawaii comes into play. Both a book and a project by Patrick Takahashi, a biochemical engineer and director emeritus at the Hawaii Natural Energy Institute, Blue Revolution works “hand-in-hand” with seasteading, but its focus is less on governance and more on creating systems powered by ocean thermal energy conversion (OTEC).

This energy concept has been around since the Carter administration and utilizes the four-degree Centigrade difference between the ocean’s surface and deep-ocean temps. Takahashi says OTEC could easily power a self-sustaining city, complete with next-gen fisheries and on-site water desalination (a notoriously energy-intensive process). In Takahashi’s vision, there would be plenty of energy left over to create exportable, sustainable fuels, so the community would also have an income source. For instance, OTEC could be used to power a kelp plantation “to produce methane or a biomethanol product, or hydrogen from hydrolysis of water,” according to Takahashi.

First, though, some billionaires are needed. The technology is there, but the Pacific Ocean International Station, the first proposed step toward an OTEC-based energy system, will cost in the neighborhood of $1.5 billion — which the group is actively seeking.
Deep-Water Living

A lot has been made of so-called underwater hotels, but most are really just a lower-level room a few feet below the surface — more like a beneath-the-waves basement than the basis of an underwater society. Jules’ Undersea Lodge, however, is different. To get to it, you have to scuba dive 21 feet deep into a Florida lagoon.

Based in a decommissioned research lab called La Chalupa, the lodge was designed by undersea-living pioneer Ian Koblick, who is also the president of the nonprofit Marine Resources Development Foundation and author of Living and Working in the Sea. Koblick has lived underwater several times for up to three months and was one of the first people to live on the edge of the continental shelf, which he did for several weeks off St. John in the U.S. Virgin Islands in 1969. He calls it a “huge adventure,” and says he and the scientists who worked there went into it without knowing “if it was going to pan out or not — and we weren’t sure of whether you’d have long-term physical problems” from living underwater. Luckily, they didn’t.

When it comes to long-term subaquatic lifestyles, Koblick is the realist and Jacques Rougerie is the dreamer. Rougerie, who has also lived underwater for long stretches, once spending 71 days in La Chalupa in 1992, is a French architect who cites Jules Verne’s Nautilus and Jacques Cousteau’s Calypso as inspirations for his beautiful organic structures of future underwater living, from insect-like underwater rooms that together form a village, to a manta ray–like ship that can explore the deepest ocean abysses, to a renewably powered underwater lab that can house eight scientists called SeaSpace. He’s thought about necessities, too, like a sea farm that would allow deep-sea denizens — he calls them “Meriens” — to grow produce underwater, supplementing their diets of more readily available kelp and fish.

Some of Rougerie’s other creations are hybrids, with a portion of the design sticking up out of the water and the rest below, like the SeaOrbiter International Oceanic Station. Rougerie calls it a “slow-pace drifting vessel.” This design, inspired by seahorses, is neither tethered to the ocean floor nor powered to move; instead, it wanders with ocean currents. This low-power design would allow for solar or wave power to keep living systems going, since locomotion would be incidental.

For now, Rougerie’s ideas are still just that. Many would depend on advanced materials that don’t yet exist to deal with the realities of undersea living — a problem Koblick is all too aware of. “You see in these architectural renderings [of undersea structures], they always show these huge glass domes. They don’t realize someone has to be out there cleaning the dome every day or you won’t be able to see out of it in a week,” he says. “You’re liable to get mussels and algae and everything that grows on coral or rock growing on the glass.”

As much as Koblick loved his time underwater, he also appreciates the importance of natural light. He says that one of the “most memorable moments of my life” was when, after three weeks of living on the bottom of the sea, under its hazy light and cold temperatures, “we came out of decompression and saw the gorgeous palm trees waving, the blue sky, white clouds, and big sun.” There’s something to be said for living on the land after all.
Up in the Air

In his book New York 2140, author Kim Stanley Robinson writes about “sky-living in sky villages,” with small, self-sustaining farming communities floating through the air attached to balloons. To Robinson, the upside of this arrangement is clear: “To be on a stable floating village platform at about 10,000 feet would be really a great view all the time,” he says.

The downside: increasingly powerful storms — which are expected due to climate-change impacts.

That’s why the best bet for sky-living might be a more itinerant existence. Like Rougerie’s SeaOrbiter, a drifting approach could be a way to deal with atmospheric changes and winds without expending energy to fight it. “It is not easy [for a balloon] to stay in one place,” says Lodovica Illari, a senior lecturer in meteorology at MIT’s Department of Earth, Atmospheric, and Planetary Sciences (EAPS). “The atmosphere has very few stagnant points.” This is why most designs for airborne habitats involve balloons, which allow whatever’s attached to (or inside) them to go with the flow.

“With food and energy provided, [balloon-borne sky villages] would be a kind of wandering life with lots of possibilities for visiting places below; a kind of combination of travel and being at home in a small village.”

With a little help from an interface called the Float Predictor, designed by Illari and her colleagues, a balloon traveler can input where they want to go and the program will forecast which is the best day and time to catch the appropriate wind. In this way, it might be possible to slow-travel the planet, sailing along on the fingers of a jet stream.

Float Predictor was developed as part of the Aerocene project, with Argentinian artist/philosopher Tomás Saraceno. He wants to leave behind the violence of the Anthropocene — the geological era defined by human beings’ defilement of the planet — and usher in what he calls the “Aerocene…an era of ecological awareness, in which we learn to float together, live together in the air, and come to an ethical commitment with the atmosphere and the planet earth,” as Saraceno puts it in a TED Talk.

Whatever you think of Saraceno’s utopian vision, his thinking has some practical antecedents: When in residence with the French space agency CNES, he became acquainted with montgolfière infrarouge (MIR) technology: balloons powered by solar radiation from the sun and infrared radiation from the earth, which have been used since the 1970s by scientists taking air samples in the stratosphere. With no motors and no electronics needed to keep them operating, these simple balloons have proven longevity — one stayed aloft for 72 days. And they can scale, says Bill McKenna, a researcher at MIT’s EAPS who worked on the Aerocene project. The larger these balloons are, the more they can lift, and “with the technology that exists, they can lift quite a bit — as long as they stay clear of tall clouds below,” McKenna says.

Robinson suggests that solar energy, easily accessible in the sky, could provide such a floating village with plenty of power, enabling sky villagers to “do agriculture in some compact, intensive way,” he says. “With food and energy provided, it would be a kind of wandering life with lots of possibilities for visiting places below; a kind of combination of travel and being at home in a small village.”

Saraceno stresses that his ideas will inevitably run up against conventional notions of boundaries and borders, both horizontal and vertical. The troposphere (the atmospheric level we live in that’s below the stratosphere) is heavily regulated — both for strategic political and military reasons and the safety of plane passengers. However, McKenna says, the “stratosphere is more open to experimentation.”

Once you get into the stratosphere, of course, you’re above the clouds — and most weather. But then you’re too high for humans to live without being enclosed in a pressurized space. So the sweet spot for humans who might live in the skies would likely be heights of 7,000 to 10,000 feet, where most people are comfortable after some adjustment. There will still be weather to contend with, and McKenna points out that there are all types of no-fly areas out there. But perhaps, in time, navigating around or over them might be just another part of reexamining how we live.

Written by Starre Julia Vartan – https://medium.com/@thecurioushuman

South African Expat Tax Guide

South African SARS Expat Tax
By
Lisa Smith –
April 18, 2019
1074
South Africa SARS Expat Tax

South African Expat Tax is the new rule by South Africa’s South African Revenue Service. Find out below what it means to you and ways to plan finances for maximum efficiency.

South Africa is switching to a new way of working out income tax for expats which means they could pay tax on money that they earn abroad and never send home.

The impending tax is due to start from March 2020 and is already causing consternation for thousands of South Africans living and working overseas. Expats in zero-tax economies, such as Dubai or Abu Dhabi, will feel the brunt of the law change as they will pay tax in South Africa on income earned, spent, invested or saved even if they or their money never set foot in their homeland but they are judged ordinarily resident.

Table of Contents

South Africa’s Expat Tax Explained
Interaction with the Common Reporting Standard
What is a ‘physical presence’?
What does ‘ordinarily resident’ mean?
Are you really an expat?
Who is impacted by the new tax?
What options do expats have?
Other taxes expats must pay
Download the Free South African Expat Tax Guide

South Africa’s Expat Tax Explained

South Africa’s SARS, South African Revenue Service, has new rules about the reform of the foreign employment income tax exemption for South African residents overseas, which is often called ‘expat tax’ for short.

This guide takes an in-depth look at the timeline of the new tax rules and how they are designed to work.

The change is all part of the shift in South African from taxing income sourced in the country to taxing income earned worldwide by residents.

Those paying the tax must are tested as ‘physically present’ or ‘ordinarily resident’ in the country.

The new rules drop the traditional expat tax exemption that was designed to stop South Africans paying income tax on their earnings at home if they were abroad for 183 days in any 12-month period, which must include a continuous absence of 60 days or more.

In Budget 2017, then finance minister Pravin Gordhan announced the abolition of the expat exemption from March 2019.

In Budget 2018, finance minister Malusi Gigaba confirmed the start date again, but public protest made him only make the new rules subject to expats earning ZAR1 million or more – equivalent to US$69,400/GB£52,450 or AED255,000.

Income tax is payable on earnings of over ZAR1 million at rates of up to 45%.

In March 2019, another new finance minister at the Treasury, Tito Mboweni, again confirmed the new expat tax rules will start from March 2020 and that the government has no intention of ditching the legislation.

He did announce a public workshop to discuss some of the issues, but no rule changes have arisen from the consultation.
Interaction with the Common Reporting Standard

At the same time as announcing the new tax on expats, like many other nations, South Africa launched a chance for taxpayers to come clean over undisclosed wealth while waiting for the Common Reporting Standard (CRS) to kick in with an amnesty.

CRS is a data-swapping network of the tax authorities of more than 100 countries. Each authority compiles a list of accounts and investments controlled by foreign nationals and sends the details to the expat’s home nation tax authority for comparison with their tax filings.

In return, other authorities in the network send financial data on expats back.

The CRS network is now up and running, so the South African Revenue Service (SARS) is already collecting information about the financial affairs of expats to cross-check against their tax returns.

The result is if the expat fails to disclose income, SARS will have data from elsewhere indicating possible tax avoidance.
What is a ‘physical presence’?

The ‘physical presence’ test determines if someone is tax resident in South Africa by checking the number of days they spend in the country.

The test is in three parts. Someone must fail to meet the date limits in each part to prove non-residency for tax – the tests are:

Did someone spend 91 days or more in South Africa during the tax year in question?
Did someone spend 91 days or more in South Africa in each of the five tax years prior to the tax year in question?
Did someone spend 915 days or more in South Africa during the five tax years before the tax year in question?

Anyone who meets one or more of the tests but who stays out of South Africa for 330 days or more is a non-resident from the last day they qualified as physically present.

Everyone else is taxed on their worldwide income and gains in South Africa.

To beat the physical presence test, expats should log the times and dates when they enter and leave South Africa to accurately record if they were physically present in the country – noting the time limits apply to full days, not part days.
What does ‘ordinarily resident’ mean?

South African tax law determines non-residents are only taxed on their income from a source within the country.

The legal term ‘ordinarily resident’ is not defined in law, but a string of court cases over the years have shaped the legal meaning.

The lead case is Cohen v the Commissioner for Inland Revenue, dating back to 1946.

The case established that a person was ordinarily resident regardless of the time they spent away from South Africa if they still regarded the country as home and the place to where they would eventually return.

A briefing note issued by the government lays out the Cohen case and other important residence cases decided in the courts.

Issues that affect residence can include if someone owns a home in South Africa, has family and social ties to the country, repeatedly visits the country, holds a South African passport or owns a bank account.

Read more about court cases determining ordinarily residence
Are you really an expat?

Like expats from other countries, South Africans abroad cannot decide they are non-resident at home and now resident in another country.

Non-residence is a matter of fact and law and the physical presence and ordinarily resident tests decide the issue for them.

That means expats can live in another country but still be ordinarily resident in South Africa if they have not taken care to break all ties with their homeland, leaving the expat open to receiving an unexpected tax bill.

The government reckons just over 900,000 South Africans live abroad, but only 103,000 can show they are non-resident in South Africa. That leaves nearly 800,000 expats facing tax bills when the new laws take effect in March 2020.

And if they are non-resident, any return to South Africa within five years of leaving can class them as failed emigrants and leave them open to financial penalties.

“An individual will be considered to be ordinarily resident in South Africa, if South Africa is the country to which that individual will naturally and as a matter of course return after his or her wanderings,” says guidance from SARS.

“It could be described as that individual’s usual or principal residence, or his or her real home. If an individual is not ordinarily resident in South Africa, he or she may still meet the requirements of the physical presence test and will be deemed to be a resident for tax purposes.”

SARS tax guidance for non-residents with income or investments in South Africa
Who is impacted by the new tax?

Any South African abroad earning ZAR1 million or more from any source will fall into the SARS tax net.

Double taxation treaties may protect expats paying tax at an equal or higher rate than in South Africa, but anyone else should expect a bill from SARS.

Companies sending workers abroad on assignment will have to consider how the tax will affect them.

Gross earnings will not only cover salaries, but benefits like accommodation, cars, school fees and trips home as well.

Those in the Gulf States who pick up a tax-free gratuity at the end of their contracts will find they have tax to pay on these lump-sums as well.

The concern is employers at home and abroad will pick up the tab for expat workers by increasing salaries and benefit packages to cover the new tax, pricing South African workers out of overseas assignments.
What options do expats have?

The CRS is a major problem for expats as they have no choice other than to honestly file tax returns knowing that their affairs are open to scrutiny as banks and financial services organisations will disclose the details to the tax authorities.

Many will have limited options:

Accept the tax reducing their net incomes
Return to South Africa
Become a financial migrant
Looking for tax planning opportunities to reduce liabilities

Financial solutions, such as pensions and bonds may defer paying tax for a significant time, but as will all tax planning, the government close the opportunity by changing the law at any time.

Leaving South Africa to become resident elsewhere can lead to other tax implications on assets such as property or investments still in the country.

Another worry for expats is most assignments abroad are paid in US Dollars, a strong currency that has driven down the exchange value of the Rand.
Other taxes expats must pay

Besides the new income tax on earnings, expats also face capital gains tax and estate duties.

Capital gains are complicated to work out because they include an element of currency gain or loss and if several exemptions, allowances or losses are available to offset against any profits.

Taxpayers also have an annual allowance of ZAR40,000.

The tax is charged at rates of from 18% to 40%.

Donations and estate duty are imposed at 20% on the worldwide assets of residents and on South African assets of non-residents.
Download the Free South African Expat Tax Guide

South African Expat Tax Guide

iExpats.com expert writers have created a simple guide to the South African Expat Tax just for our readers.

This guide will explain the South African Expat Tax and talk through the issues and steps you can take to be in a better financial position. Download the free guide by following the link – https://www.iexpats.com/guides/south-african-expat-tax-guide/

South African expats foreign employment income tax

Hugo van Zyl’s article – https://www.thesouthafrican.com/south-african-expats-foreign-employment-income-tax/

How foreign employment income tax will impact South African expats
Do not believe the fear mongers suggesting you must emigrate formally to correct non-compliance.
Hugo van Zyl by Hugo van Zyl – 2019-01-29 11:01 – in South Africans Abroad

The current hype into formal emigration being the absolute and final solution to escape the tax consequences of the new #Tax2020 rule has resulted in too many expats South Africans incorrectly opting for formal emigration.

Any expat that is concerned about the pending changes should immediately ask the following question: Did I file all my tax returns up to February 2018 and am I correctly registered as a provisional taxpayer? Being tax exempt does not exempt you from tax filing obligations.

Before one gets overly concerned about the March 2020 [#Tax2020] liability, you need to address the issue of outstanding and overdue tax returns. Anyone impacted by the new rules should have been tax filing with SARS.

If not tax filing for some years, one must ensure you have correctly tax emigrated and paid your exit levy on time. Doing a financial emigration in the current tax year, will not shield you against tax penalties and interest on the unpaid taxes.

Do not believe the fear mongers suggesting you MUST emigrate formally (Financially Emigrate [FE]) to correct non-compliance and to protect you against the new rules. Tax emigration and not financial or formal emigration dictates your SARS exposure

Before we consider all the incorrect and half-truths out there, one should first determine the exact rules, consider the legislature’s intention behind the changes and then only apply it to one or more specific cases. This handrail is not able to address all the typical scenarios. We will, however, attempt to identify three or four typical examples we have seen in recent times.
The new rules affect 1 March 2020

The rules only apply to tax residents, albeit that they reside outside SA.
It follows that once you tax emigrated, having told SARS of the exit and paid your exit tax on worldwide assets, you are no longer required to report foreign income (be it remuneration of passive investment income) to SARS.
For this reason, many expats are keen to tax emigrate, yet sadly they are unwillingly and unnecessarily coerced into financial emigration also known as formal emigration.
No longer will the full extent of foreign employment income earned be fully tax exempt.
SA tax residents and only tax residents will, as has been the case in the past, must report the full extent of foreign income to SARS.
Currently, on assessment SARS will unilaterally tax exempt the total income from tax
Tax residents spending +183 days outside of South Africa, rendering
employment services will only be exempted up to the first R1million of their employment income (referred to in the act as remuneration) earned abroad;
tax residents will still be required to have spent a continuous period of at least 60 full days, rendering employment services outside South Africa, during any 12 months to qualify for the exemption
Any foreign employment income more than R1 Million will, as of the 2021 tax year, commencing on 1 March 2020, taxed in South Africa, applying the normal individual tax tables.
The effective tax rate will be determined with reference to the aggregate worldwide income and deemed income, reduced by the first R1 million in respect of foreign income from employment.
If so taxed on remuneration exceed R1 million, the tax resident will be able to claim a foreign tax rebate with SARS, alternately, the taxpayer can rely on the various tax treaty benefits.

The Treasure Explanatory Memorandum [EM], issued in 2017, justifies and explains the changes as follow:

“Tax residents who spend more than 183 days outside of South Africa rendering employment services will now only be exempted up to the first R1 million of their employment income earned abroad. The R1 million exemption will provide relief for lower to middle-income South Africans working abroad.

“Any foreign employment income earned over and above this amount will be taxed in South Africa, applying the normal tax tables for that particular year of assessment. Residents will still be required to have spent a continuous period of at least 60 full days, rendering employment services outside South Africa, during any 12 months to qualify for the exemption.”

Keywords and tax phrases to be understood

Remuneration from employment – the word remuneration as used in the SA Income Tax Act, 1961 as amended [ITA], does not define remuneration. SARS Interpretation Note is quick to remind the taxpayers that the 4th Schedule or PAYE rules’ definition is not relevant in the main body of the
Resident – resident, has been defined for tax and Exchange Control [Excon] purposes, yet either of the two set of rules deals with or refers to the other
The Excon rules does however deems a non-citizen in possession of a green bar-coded ID or Smart Card ID, to be an Excon Resident
See the Excon Guide extract below that refers to a permanent resident. Therefore the Home Affairs decision to grant indefinite residential stay and employment rights has a direct impact on the Excon Resident rules
There is no reference in the Excon Resident definitions speaking to tax residency, and vice versa.
Tax resident – Although the actual law changes do not refer to residents, it is trite law that only tax residents can and need to claim the foreign income exemption, as foreign income of a tax non-resident is not subject to our ITA; yet
tax resident does not include any person who is deemed to be exclusively a resident of another treaty country; provided
that where any person that is a resident ceases to be a resident during a year of assessment, that person must be regarded as not being a resident from the day on which that person ceases to be a resident
Emigrant, nor non-resident is defined in the ITA, yet
For purposes of Excon is defined as South African resident who is leaving or has left South Africa to take up permanent residence or has been granted permanent residence in any country outside the CMA
Excon Resident – as defined and deemed in terms of Excon manuals
Resident, for formal emigration [FE} purposes means any natural person who has taken up permanent residence.
For the purpose of the Authorised Dealer Manual, any approved offshore investments held by South African residents outside the CMA, will not be Excon resident
However, such entities owned by Excon Residents (albeit a company in SA) remains subject to Excon rules and regulations
Excon non-resident – as defined in the Excon manuals issued by SA Reserve Bank [SARB]
Non-resident means a person (i.e. a natural person or legal entity) whose normal place of residence, domicile or registration is outside the CMA
Emigrants mean a South African resident who is leaving or has left South Africa to take up permanent residence or has been granted permanent residence in any country outside the CMA.
From practical experience, we know SARB may allow, say UAE based expats to formally emigrate, despite them not being able to register as a permanent resident of UAE or say Dubai.
Non-residents for Excon purposes include:
Any natural persons from countries outside the CMA who are temporarily resident in South Africa, excluding those on holiday or business visits, i.e. a person on work visas or retiree visa and in most cases persons on a spousal visa without the right to seek local employment.

Financial Emigration (FE) is exactly what it says, it is a financial status change that one can elect to undergo, provided you have left SA to take up or have been granted a permanent residence permit, outside the CMA [Common Monetary Area, being SA, Namibia, Lesotho and Swaziland).

It is correct that the SARB financial process is subject to filing a tax emigration clearance to confirm a good tax standing, that all returns were filed, and all taxes are paid or provided for on departure.

Recently a Fin24 article quoted Claudia Aires Apicella, head of financial emigration at Tax Consulting SA, suggesting that Apicella and Tax Consulting SA is of the opinion that:

“When one “emigrates financially”, however, they cease to be a South African tax resident and will not be liable to pay any South African tax on their worldwide income. They will, however, be required to declare any South African sourced income which may be taxable, such as rental income.”

FE is not a tax emigration requirement, nor does it trigger or guarantee tax emigration or non-resident tax status. Product providers or FE specialist, now promoting FE at all cost or as the ultimate solution to escape the new #Tax2020 rules, are misleading taxpayers.

Yes, the minute your chosen adviser suggests FE is NOT an option, it is a pre-requisite or a way to tax emigrate, be scared, be very scared and obtain a second opinion from a tax specialist not earning his fees from the FE process.
What then is the best solution or option available to taxpayers?

There is no one single solution for all. The answer is in client-specific tax profiling and the following tax issues and profiles, were identified during the past years:
Expats with no tax-exempt amounts

It is of great concern, having seen how many expats South Africans, not having tax emigrated (i.e. they are tax resident or deemed to be tax resident) incorrectly believe they have been and will continue to enjoy a tax exemption on their foreign income.

The act is rather clear, and Interpretation Note 16 (Issue 2) [IN16] stipulates that the exemption is limited to remuneration from foreign employment, while passive and business income remains fully taxable for as long as one is tax resident in SA.

Passive income and independent contract income, does not qualify for to the 183/+60-day exemption; whereas
Leave days, albeit spent in SA, may qualify for exempt days to determine the proportional exemption, provided the more than 183 days were achieved.

Tax treaty protection

Most expats live and work within a country where a tax treaty may indeed protect them, provided they have tax emigrated from South Africa.
Tax emigrated expats

Many expats tax emigrated some years back, yet they have failed to notify SARS and more importantly, failed to pay the exit tax. Their tax exposure, penalty and interest liability now faced may indeed have a bigger cashflow impact than the new #Tax2020 rules.
Payroll tax at source

Working in a country that does not tax you on worldwide income, yet they tax you on the local income from employment. These tax systems rely on the source-based tax rules to collect tax against immigrant or guest employee, yet most taxpayers did not even know their employers paid the source tax on their behalf. Taxpayers are advised to ask their employers about the taxes they paid on their behalf, as SARS will allow a tax credit for said local taxes. This rule applies to both treaty and non-treaty countries.
Pay up

There are indeed a small number of expats that do not have any option but to adjust their lifestyle as they will need to adjust their new after-tax net income, as of 1 March 2020. For them #Tax2020 is painful. One such a class of taxpayers are so-called independent contractors.

Independent contractors do not earn “remuneration” and as a rule, do not qualify for the exemption. A person must, therefore, be an employee earning remuneration to qualify for the exemption.
Contract workers must be under contract and outside SA for more than 183 days while under contract. Unemployed periods spent outside SA does not count, whereas rest periods between rotational shifts (oil rig workers) do qualify as its leave periods. Contract workers are not providing a service during the period between contracts, normally fails the days’ test, because both the service as an employee and the physical presence test must be complied with to ensure the relevant tax exemption.

Officers and crew on a ship

There is a separate set of rules addressing the tax exemption of natural persons employed on a ship. There is indeed a separate Interpretation Note 34, dealing with employees on the water. Employees on the ship, not involved in the passage or navigation of the shop (mining and exploration staff, as well as operators of the onboard shops) will have to apply the rules as set out in Interpretation Note 16 (Issue 2). The main differences between Interpretation Note 16 and 34 are:

The 183 days for crew and officers are determined with reference to a tax year, whereas the other foreign workers test their days outside in any twelve months; and
The 60-days continuous and uninterrupted day rule to qualify which does not apply to crew and officers on a ship transporting persons for reward, and
Ship crew and officers will not be subject to proportional tax on the days spent within SA, whereas an employee qualifying under the 183/+60 day rule (Interpretation Note 16 (issue 2)) will have to pay SA tax on the days employed in SA, i.e. they only enjoy a proportional exemption; and most importantly
The crew and officers are qualifying for the exemption as explained in Interpretation Note 34, will not be subject to the R1m exemption cap.

SARS guidelines issued to date

Sadly, one year after the promulgation of the new act, and just one year away from implementation and SARS has issued no new or revised guidelines. Interpretation Note 16 (issue 2) was in the making for near 18 months, and the general 2018 tax guide was only issued 11 days before the 2018 tax filing deadline. SARS is notoriously slow in updating their guides and interpretation notes. It is also of great concern that they have not even issued Interpretation Note 16, draft issue 3 for comment by taxpayers and the industry.

Hopefully, SARS will soon issue Interpretation Note 16’s 3 version and even consider updating Interpretation Note 34.

Financial Emigration (FE) is indeed advisable for true emigrants, not intending to return to SA. Persons forced to return to SA or persons most likely to return to SA at the end of their work permit stay, should think twice before they allow a service provider to convince SARB they qualify as Excon emigrant.

Using FE application date to trigger tax emigration, is indeed extremely risky. An expat living in Dubai, claiming tax emigration in 2019 calendar year (the tax year 2020 or 2019) confirms they are tax non-resident because of the UAE tax treaty rules. Nothing wrong with that, yet the treaty has been in place and effective since 23 November 2016.

Should the FE applicant have been in the UAE on 23 November 2016, and now avail to the USA tax residency certificate, they are indeed admitting they may have tax emigrated on 22 November 2016. The section 9H (in its current format) exit tax charge, dates to 15 June 2015.

On 23 November 2016, as the UAE treaty became effective, many SA expats technically tax emigrated on the day before them becoming exclusive tax resident in the USA (because of the treaty). Filing tax emigration to align with the FE exit day, is most probably an incorrect and fraudulent tax position to take.

Having failed to inform SARS of the correct tax exit date, based on the physical exit date applied to the treaty tie-breaker rules, may result in an understatement tax penalty.

The physical exit date is normally disclosed on the FE application form (MP 336(b) and a copy are filed with SARS). Should SARS later decide to audit or verify the tax exit date or final tax return filed following the approval of the tax emigration clearance certificate [TEC], one may not claim the benefit of tax prescription (reading tax certainty).

It follows that, because of the incorrect and incomplete tax disclosure, SARS is not bound by the three-year prescription rule, i.e. they can issue new assessments after say five years.
The SARB FinSurv [Excon] approved FE, does not change your tax status.

Only the SA Income Tax Act (ITA) may be used to determine tax emigration status, yet in certain instances, the resident definition in ITA section 1, allows treaty country residents, to be tax non-resident.

Reading the tie-breaker rules or applying said rules may not be adequate. The definition of a resident in the treaty overrides the ITA definition with the result that expat in Dubai may be tax non-resident while on a work permit only, whereas an Australian expat on a work permit will remain SA tax resident.

The Australian treaty [DTA] excludes from the word resident, any person paying tax in Australia, on Australian sourced income only. The UAE DTA does not contain this similar restriction, most probably because the UAE does not levy any income tax on natural persons.

In Australia, a resident pay tax on worldwide income as of the date they qualify or is granted permanent residence status. Expats in Australia, availing to a work permit only, does not pay ATO taxes on worldwide income. The SA/ Australian DTA excludes from the term resident, an expat on a work permit only (because the ATO only tax work permit residents on source income only). Therefore SA expat can’t claim tax emigration status.
In Conclusion

Expats living outside SA must first ask the following questions before they agree to financially emigrate:

Can I avail to tax treaties and tax emigrate, as this is not subject to financial emigration? If yes, on what date was the tax exit? If it was in the past (for UAE could have been 22 November 2016), should I file for SARS availing to the Voluntary Disclosure Options to back date the process?
Can I claim tax credits in SA, as I have paid the necessary tax in the country of employment? It could be that your employer is paying on your behalf, do ask the HR department.
If you are not in a treaty country, can I tax emigrate based on facts and intention?
Could the FE option be part of the building blocks to show intention to exit? If so, was the tax exit date this year or sometime in the future?

Why should I complete the Financial Emigration process? Here is some reasons:

To cash out a retirement annuity
To be able to re-invest into SA via my for offshore trust or non-SA company to ensure I am not exposed to SA estate duty
To exit large funds (more than R20m per family) sourced from past savings or huge inheritance?
Why is the service providers placing so much emphasis on FE, insisting I incur the huge costs?
Should I not obtain a formal tax opinion from a person not selling FE to one and all, but only to persons that could show a clear benefit?

https://www.thesouthafrican.com/does-financial-emigration-answer-expat-income-tax/ – Written by Hugo van Zyl