By Greg Atherstone, Associate Director JPS
Proposed changes to the tax laws potentially affecting South African’s living abroad in low tax jurisdictions such as Singapore.
In 2001 South Africa changed from a source based tax system to a residency based system which is when you are taxed on your worldwide income. When this worldwide implementation of tax occurred back in 2001 there is a clause that on your employment income you are entitled to an exemption if you spend more than 183 days outside the country.
On 22nd February 2017 Pravin Gordan announced this exemption would only be given to those who can prove that they are paying tax in another jurisdiction. On the 18th of July this year a small change to this was announced with the plans to scrap that entire section.
The US are probably the best at clamping down on tax avoidance and the systems they have in place that even a foreign bank account needs to be declared. Currently there are close to 200 countries which has prescribed to the Combat Reporting Standards (CRS) that if you are a South Africa resident or South African citizen or you have told any financial institution around the world that you invest in SA. This information will automatically be exchanged with SARS but how or if they will act is still to be determined. The CRS is becoming a more and more common among countries.
In South Africa, as long as you have an intention of returning to South Africa and as long as South Africa remains your main home then you are still regarded as a tax resident. There are tax treaties with certain countries and Singapore is one of them but to claim that treaty with SARS could prove to be very difficult and not as simple as obtaining a tax residence certificate somewhere else. Looking at the tax treaty between Singapore and SA you will need to prove which country your permanent home is in. For many EP holders, they could be seen as a temporary assignment as they are not a Citizen or PR and they do not own property in Singapore.
If vital interests cannot be determined as there is no permanent home, residency is determined by which individual has a habitual abode which might allow for you to be non SA resident. If habitual abode cannot be determined then this will revert back to the citizenship of that individual.
Only on the 18 August 2017 will there be some more clarity of the new tax laws amendments and it looks likely to prove you are not a South African resident could be a tricky affair. If this new legislation goes through you would need to Financially Emigrate and informed SARS and the Reserve Bank you have left the country and settled all Capital Gains Tax liabilities. It all depends on whether you have been outside the country for five years or more the route to Financially Emigrate (I will touch more on this in another article). The other side is to not say anything to SARS and let them come and catch you but this is not something we are supporting.
Once the legislation is passed and we have more clarity on the matter I will be in touch on how to best Financially Emigrate or what other options are available?
Annual Tax Filing Process (Foreigners)
Associate Director, JPS
Contact Number: 91807404
Email Address: email@example.com
Sources: IRAS.Gov.sg; Biznews; Fin24.com; Timeslive; PWC
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