RSA: Taxmigration vs. Financialemigration

Reference: https://taxmigration.com/2019/09/20/taxmigration-vs-financialemigration/ – I gratefully acknowledge Hugo van Zyl’s authorship of this article:

Eventually we have SARS buy-in and confirmation that formal emigration is not a tax act process.

What we now need is SARS and all tax practitioners to stop using a brand name to refer to a SARB process referred to as “to formalise their Emigration ” an Exchange Control resident

I am often challenged about the term #taxmigration not being defined or referred to, anywhere in any tax act! It is correct, it is not a defined term, it is my brandname hence http://www.taxmigration.com

Equally so, financial emigration is a brand name and through rather controversial press articles the group behind the name got the world to use their brand name. Credit to their marketing strategy but its now time we go back to basics and true facts!

Formal Emigration is the correct and preferred word, and hopefully soon the following SARS extract will correctly refer to Formal Emigration

What is the impact of financial emigration on tax residence?

Acquiring approval from the South African Reserve Bank to emigrate from a financial perspective is not connected to an individual’s tax residence. Financial emigration is merely one factor that may be taken into account to determine whether or not an individual broke his or her tax residence. An individual’s tax residence is not automatically broken when he or she financially emigrates. The deciding factor remains whether or not an individual breaks his or her ordinary residence.

Source: SARS webpage

The above extract is not necessarily 100% correct!

The last sentence should perhaps have read:

The deciding factor remains whether or not an individual breaks his or her tax residents status because of DTA or tax treaty rules and tiebreakers or because they are truly no longer ordinarily (yes, not ordinary but ordinarily) resident.

The above mentioned extract is not the only place where the SARS webpage needs urgent attention. The following FAQ extract is also incorrect or at least incomplete:

What qualifies an individual as a non-resident?

An individual is regarded as a tax resident of SA if he or she is ordinarily resident in South Africa or meets the requirements of the physical presence test. If neither of these apply, the individual will be regarded as a non-resident.

For more information on these two tests, please refer to the Guide on the Residence Basis of Taxation for Individuals 2008/2009.

Source: SARS FAQ pages

The correct wording, we respectfully submit should be:
What qualifies an individual as a non-resident?

An individual is regarded as a tax resident of SA if he or she is ordinarily resident in South Africa or meets the requirements of the physical presence test. If neither of these apply, or should a person be deemed to solely tax resident in a DTA or treaty country, the individual will be regarded as a non-resident.

The SARS Glossary R page is indeed technically more sound where it states (and we selectively quote):

Resident

As defined in section 1 of the IT Act– Includes: Any natural person who is ordinarily resident in South Africa; or Any natural person who complies with the physical presence test; and …, but: Excludes any person who is deemed to be exclusively a resident of another country for purposes of the application of any agreement entered into between the government of South Africa and that other country for the avoidance of double taxation.
Source: SARS Glossary R

Formal Emigration vs. Financial Emigration- what is the difference?

Their is no such process as financial emigration! It is a brand name cleverly marketed by certain product suppliers. Tax law solution (to cease tax residency as envisaged in ITA section 9H) purposefully (or is it dangerously?) confused with a lucrative business to assist with Formal Emigration

What then is the true wording or correct SARB terminology to use and what is the source for this?

We quote from SARB FAQ pages:

In terms of exchange control policy, private individuals (natural persons) who reside permanently in a country outside the Common Monetary Area are required to formalise their emigration by completing a Form MP336(b).

In conclusion

We call on all tax practitioners, authorised dealers, journalists and forex dealers to rather revert to the correct terminology:
Formal Emigration

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