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163. Beware of the tax implications of living overseas


We left South Africa 10 years ago and eventually ended up in Canada where we now live.  We never officially emigrated.  Will this cause problems in years to come?


Many people leave South Africa to go and work abroad. What was originally an adventure to get some offshore experience often becomes a permanent arrangement.  As they did not intend formally emigrating when they initially left the country, they are still registered with SARS.  

If you never informed the authorities of your intention to live elsewhere, SARS will still regard you as a South African taxpayer even though you have been in Canada for 10 years. 

If you are a South African taxpayer, you will be taxed on your worldwide income, regardless of where you live. This is important to bear in mind, especially of there is no double taxation agreement in place between South Africa and the country you are currently residing in. 

Now in the past, there was a formal process called financial emigration.  This was replaced a couple of years ago, a new concept of being “ordinarily resident”.  SARS takes various factors into account when it comes to determining if you are ordinarily resident in a country.  These would include:

  • Where you work
  • Where you stay
  • Where your family and social relationships are based.

 In essence it is the place that you call home. In your instance, it would be Canada. You would need to notify SARS that you are no longer ordinarily resident in South Africa and that you should be deregistered as a taxpayer.  This will have consequences.

You will need to bring your tax returns up to date 

I suspect that you have not submitted any income tax returns over the past 10 years. These may be required in order to bring your tax affairs up to date. Under normal circumstances, if you have been paying taxes in your new country, there's a good possibility that you will just have to submit null returns via efiling as there is probably a double taxation agreement in place with South Africa. 

You will be liable for CGT on your assets 

Breaking your SA residency will trigger CGT on the day before you cease to become ordinarily resident.  You will have to pay capital gains tax on all your assets excluding immovable property on the day before you broke your SA residency.  They will treat you as having sold all your assets and levy CGT as if you had sold all your assets.  Your worldwide assets excluding immovable property could also fall into this net so it would be advisable that you speak to a tax lawyer before taking this step.  

Once this has been done, you will cease to be a South African taxpayer and will no longer be liable for South African taxes or estate duties.