Leaving Mzansi? South African expats could soon be hit by new ‘exit tax’

Those who decide to leave South Africa for pastures new may soon find that they will have to fork out a little more than they were hoping to. A so-called ‘exit tax’ has been proposed to come into effect from next year, which will ensure all expats have to pay a little extra when giving up their residency in Mzansi.

South African expats may be hit by new ‘exit tax’

Certain taxable charges are already in place for those leaving the country permanently. But the potential exit tax would take money from the retirement funds of private individuals. So, if you decide to emigrate, this new law would tax your pension funds – ensuring that would-be expats get hit by a ‘double-whammy’ of SARS bills.

• Tax Consulting South Africa are experts in this field, and they explained both the draft and current expat tax laws:

“In the Treasury’s latest published Draft Tax Bills, which incorporates the tax proposals made in the 2021 Budget, the amendment proposes to tax retirement fund interests of individuals when they cease South African tax residency. This proposal is the latest amendment directed at taxpayers who intend to leave South African shores permanently.”

“The current ‘exit tax’ that applies in the event of a cessation of tax residency provides that a taxpayer will be deemed to have disposed of certain qualifying assets on the day before ceasing tax residency. This event triggers a tax liability in respect of the growth on these assets before the taxpayer leaves the South African tax net permanently.” | TCSA

The fightback begins

The proposals will be challenged, however: The South African Expatriate Petition Group (TPG), led by Barry Pretorius, has asked TCSA to take up their case and provide legal opposition to the amendments. The draft bill is open for public comment until 28 August, and according to the tax specialists, this is how the process would work:

“The proposed amendment does state that the tax is triggered upon ceasing tax residency. However, the payment of this tax will be deferred until actual withdrawal from the fund. The tax will be levied on the value of the interest on the day prior to ceasing residency, but will be calculated in terms of the lump sum tax tables prevailing at the time of payment.”