Financial emigration is the process used by many South Africans abroad to formalise their non-resident status for both tax and exchange control purposes.
The detail within this post and on this page is not legal or financial advice and should not be construed as such. Please consult a professional advisor to consider the specifics of your personal situation. We accept no liability or responsibility for the correctness of the details within this post. E&OE.”
The topic of Financial Emigration is often discussed on this page and thus it is appropriate to update some information for all.
The Financial Surveillance Department of the South African Reserve bank as of the 1st March 2021 amended the Currency and Exchanges Manual for Authorised Dealers.
In a nutshell, the concept of Financial Emigration has been phased out!
The new terminology is a non-tax resident. It is important to state that this amendment only affects South African residents and South African emigrants living abroad who have not formally emigrated prior to 1st March 2021.
We explain the changes below as simply as possible.
Section B.2(J): Private individuals ceasing to be South African tax residents.
The previous process of formerly emigrating involved two scenarios’:
- An individual went through a formal emigration process whereby they applied to SARB to emigrate through their bank by completing an MP336(b) form.
The emigration process would then involve tidying up their tax affairs with SARS. Once in order, SARS would provide a tax directive to the individual.
The final step would be SARB approving the emigration and placing it on record that the individual is a non-resident of SA. - If a South African resident has been out of the country for more than 5 years, is a resident of another country, with no assets left in SA, they could complete a MP336(b) form, and a bank could log this with SARB to declare that person a non-resident of SA.
This process of emigration has been phased out. An individual wanting to “emigrate” will only deal with SARS.
They will apply to SARS for a Tax Clearance Certificate to remit money offshore from the sale of their assets, and then apply to become n0n-resident for tax purposes. This does not however make them a non-resident of SA.
If that individual decides to travel back to SA and spends extended periods in SA, then the SARS physical presence test will apply, and they could then qualify to be taxed in SA again in the future.
The new section now states:
A South African living in SA and a South African living abroad who has packed up and left the country are now viewed as one and the same.
Therefore, the R 1million SDA and the R 10 million FIA applies to both.
The implications of this change:
The change in regulation does not necessarily affect SA residents wanting to “emigrate”, it may make the process easier and cheaper as it cuts out involving the commercial banks as well as SARB in the process who charge for the emigration.
Individuals are not declared non-residents any longer and residency as well as tax obligations may kick in again based on their movements in a period of time and business dealings within SA.
In respect of the withdrawal of retirement funds, payment of lump sum benefits to individuals may only occur once the individual has remained a non-tax resident for at least 3 consecutive years.
The issue regarding the change arises primarily for those who left South Africa and:
- Did not formally emigrate before 1st March 2021, and
- Have misplaced their SA Green Barcoded ID Book, or
- Do not have their SARS income tax number
[wpfa5s icon=”fa-arrow-right”]If you do not have your ID book, you will not be able to remit any funds out of SA.
Solutions to SA residents abroad:
As it stands currently:
Unfortunately, those who have not formally emigrated and have misplaced their Green Barcoded ID Books, will need to apply for a new ID book if they are to receive inheritance or other flows of funds from SA.
If you have an ID book but cannot remember your SARS tax number, or if dormant as you have been out of SA for that long, you will need to reactivate your SARS tax number via e-filing or a tax practitioner to remit more than R 1 million.
SARS have offered a remedy that SA residents abroad will need to go through the TCR01 process with SARS to confirm that they are non-resident for tax purposes.
This has not been tested yet and we cannot clarify how this will affect those with no ID Books or SARS tax numbers yet.
Info on the web
- SARS – Cease to be a resident
News articles worth reading
- Businesstech – here are the new rules
- Moneyweb – Financial emigration: What is it and when is it appropriate
Related Content
Procedure to cease tax residency with SARS
Disclaimer:We are not tax consultants, always refer to a professional Tax consultant concerning your taxes. The Term Financial immigration is not being used anymore. The new concept for tax liability in South Africa is being a tax residence or not. Before considering ceasing your tax residency in South Africa, make sure that you need to do it. South Africa and Germany have a double taxation treaty, see more on our Income Tax page. When you are earning your salary in Germany, and you are still a tax resident in South Africa, you need to declare your foreign income to SARS by submitting an annual Tax return to SARS. If you earn less than R1.25 million per year, you do not pay any taxes on this foreign income in South Africa. If you earn above that, the taxes you already paid in Germany are taken into account when calculating the taxes due on the amount above R1.25 million. Detailed info on Foreign Employment Income Exemption from SARS Before making financial decisions, speak to a professional to get expert advice about your specific situation. Initially the taxpayer could inform SARS of its decision to cease residency through the following two channels: By capturing the date on the ITR12 tax return (which from 2017 requests one to check the box as to residence status) and a letter will be sent to the taxpayer requesting them to submit supporting documentation corroborating their claims. However, SARS has recently indicated that this information will be prepopulated on the ITR12 and cannot be amended. Via the Registration, Amendments and Verification Form (RAV01) which can be found on e-Filing. The date on which they ceased to be resident must be captured under the “Income Tax Liability Details” section. A non-resident declaration form must be completed and submitted with the relevant supporting documents on e-Filing. The taxpayer should also inform SARS by capturing the applicable date on their next ITR12 tax return (if applicable). New Changes A taxpayer should therefore now capture the emigration by amending the RAV01 particulars which should then, once reviewed by SARS, follow through to the ITR12. Taxpayers ceasing tax residency in terms of the physical presence test need to only supply the standard documents listed below. Taxpayers ceasing residency as a result of the application of a Double Taxation Agreement will need the standard documents and a certificate of tax residency from the relevant Foreign Revenue Authority, or if they do not produce such certificates, a letter from the Foreign Revenue Authority stating that they are tax resident in that country. Taxpayers ceasing residency in terms of the ordinarily residence test will need to supply a motivational letter and further specific supporting documents listed below. Supporting documentation The onus is on the taxpayer to prove that s/he is not subject to tax in South Africa, and by implication the onus is on the taxpayer to prove that s/he has become non-resident for South African tax purposes as and when declared. Standard supporting documents include: Signed non-resident declaration indicating on what basis the taxpayer qualifies to cease tax residency A letter of motivation setting out the facts and circumstances in detail to support the disclosure A copy of the taxpayer’s passport and travel diary. Specific supporting documents and details include: The type of visa applied for to go to the foreign country Where the taxpayer has already taken up permanent residence, submission of proof. (For example, residential address, employment contract etc.) A certificate of tax residency from the Foreign Revenue Authority or a letter from the same that indicates that the taxpayer is regarded as tax resident in that country Details of any property still available in South Africa and the purpose of such property i.e., rental property, holiday house Details of all business interests remaining in South Africa, including employment or investments Details of immediate family members who remain in South Africa and why Details of social interests for example, gym contracts, church membership, recreational clubs and the location of personal belongings Details of all return visits to South Africa – nature, reason, and frequency References SARS Cease to be a Resident SARS – Update on Cease to be a Resident Information supplied by LSG Integrated, on 28.07.2022. The information was correct at the time of writing, and will be updated as we become aware of changes Related content
Financial Emigration
Financial emigration is the process used by many South Africans abroad to formalise their non-resident status for both tax and exchange control purposes. The detail within this post and on this page is not legal or financial advice and should not be construed as such. Please consult a professional advisor to consider the specifics of your personal situation. We accept no liability or responsibility for the correctness of the details within this post. E&OE.” The topic of Financial Emigration is often discussed on this page and thus it is appropriate to update some information for all.The Financial Surveillance Department of the South African Reserve bank as of the 1st March 2021 amended the Currency and Exchanges Manual for Authorised Dealers.In a nutshell, the concept of Financial Emigration has been phased out!The new terminology is a non-tax resident. It is important to state that this amendment only affects South African residents and South African emigrants living abroad who have not formally emigrated prior to 1st March 2021. We explain the changes below as simply as possible.Section B.2(J): Private individuals ceasing to be South African tax residents.The previous process of formerly emigrating involved two scenarios’: An individual went through a formal emigration process whereby they applied to SARB to emigrate through their bank by completing an MP336(b) form.The emigration process would then involve tidying up their tax affairs with SARS. Once in order, SARS would provide a tax directive to the individual.The final step would be SARB approving the emigration and placing it on record that the individual is a non-resident of SA. If a South African resident has been out of the country for more than 5 years, is a resident of another country, with no assets left in SA, they could complete a MP336(b) form, and a bank could log this with SARB to declare that person a non-resident of SA.This process of emigration has been phased out. An individual wanting to “emigrate” will only deal with SARS.They will apply to SARS for a Tax Clearance Certificate to remit money offshore from the sale of their assets, and then apply to become n0n-resident for tax purposes. This does not however make them a non-resident of SA.If that individual decides to travel back to SA and spends extended periods in SA, then the SARS physical presence test will apply, and they could then qualify to be taxed in SA again in the future. The new section now states: A South African living in SA and a South African living abroad who has packed up and left the country are now viewed as one and the same.Therefore, the R 1million SDA and the R 10 million FIA applies to both. The implications of this change: The change in regulation does not necessarily affect SA residents wanting to “emigrate”, it may make the process easier and cheaper as it cuts out involving the commercial banks as well as SARB in the process who charge for the emigration.Individuals are not declared non-residents any longer and residency as well as tax obligations may kick in again based on their movements in a period of time and business dealings within SA.In respect of the withdrawal of retirement funds, payment of lump sum benefits to individuals may only occur once the individual has remained a non-tax resident for at least 3 consecutive years. The issue regarding the change arises primarily for those who left South Africa and: Did not formally emigrate before 1st March 2021, and Have misplaced their SA Green Barcoded ID Book, or Do not have their SARS income tax number [wpfa5s icon=”fa-arrow-right”]If you do not have your ID book, you will not be able to remit any funds out of SA. [wpfa5s icon=”fa-arrow-right”]If you have your ID book you will be permitted to remit up to R 1 million out SA in respect of your SDA allowance.Those with an ID book, who also have a SARS tax number may then apply to SARS to remit more than R 1 million out of SA.South Africans living abroad will thus find it increasingly more difficult to remit funds out of SA, especially proceeds from inheritance and trusts. Solutions to SA residents abroad: As it stands currently:Unfortunately, those who have not formally emigrated and have misplaced their Green Barcoded ID Books, will need to apply for a new ID book if they are to receive inheritance or other flows of funds from SA. If you have an ID book but cannot remember your SARS tax number, or if dormant as you have been out of SA for that long, you will need to reactivate your SARS tax number via e-filing or a tax practitioner to remit more than R 1 million. SARS have offered a remedy that SA residents abroad will need to go through the TCR01 process with SARS to confirm that they are non-resident for tax purposes.This has not been tested yet and we cannot clarify how this will affect those with no ID Books or SARS tax numbers yet. Info on the web SARS – Cease to be a resident News articles worth reading Businesstech – here are the new rules Moneyweb – Financial emigration: What is it and when is it appropriate Related Content
Income Tax / Lohnsteuer
We receive a lot of questions about income tax declarations and where to get help, especially getting help in English.First I have to state that we are not tax consultants and by German law are not allowed to give any tax advice. You can read more about it here, the article is German but can be easily translated.Basically your immediate family can assist you with your taxes, see the article, but if there is no family relationship you are not allowed to assist someone. You are not allowed to help with your friend’s tax return. This also includes a partner if you are not engaged or married.See more from Steuertipps, Some of the options available to you are: Get a Tax advisor. In Germany they are called der Steuerberater Get help from a Lohnsteuerhilfeverein ( A wage tax aid association is a self-help institution run by employees for employees to provide assistance in wage tax matters and in special income tax assessment cases (Section 13 StBerG). They were created in 1964 at the instigation of the trade unions. The aim of the legislature is to ensure that employees can receive tax advice at reasonable costs regardless of their income.) To find one in your area you can search online or on this website. You can specify your language as well e.g Englisch or English Do it yourself. You might want to consider using software or apps. The tax rules in Germany are extremely complicated especially when both partners are working and you have kids.These rules also changes yearly so make sure that if you use software, it is up to date Where to get more information: Deutscher Steuerberater Verband / German Association for Tax advisers Make it in Germany Bundesministerium der Finanzen as well as this page from them Amtliches Lohnsteuer-Handbuch from the Bundesministerium der Finanzen Handbook Germany – The German Tax System Some basic information The German Tax year runs from January to December and you can submit your tax return between 1 January and 31 July the following year.Lohnsteuer and Einkommensteuer – They differ by the method of collection. Lohnsteuer is collected at source and paid directly to the Finanzamt (tax office) by the employer while the individual must pay Einkommensteuer himself.There are 6 German Income Tax Classes “Lohnsteuerklasse”. You can find the list here.South Africa uses a Residence base tax system and Germany a Source base system.To get a basic idea of your taxes you can use a Wage tax calculator from SteuerGoELSTER (Elektronische Steuererklärung) – For online tax submissions. You need to register for a free account. The application is currently only in German How and where do I register for Tax As an employee, you will receive your tax ID (Steueridentifikationsnummer), Format: 12 345 678 901, when you register at the Bürgerampt and Auländerbehorde. This is like an Identity number and you will keep it for life. Children born in Germany receive their tax ID at birth. As a freelancer or company, you must register for a tax number (Steuernummer), Format: 12/345/67890 or 3012034567890, that you use on your Invoices.This number is related to your place of residence and if you move to a new town you will need to apply for a new number. Application is done at the Finanzamt. You also apply for a VAT number (Umsatzsteuer-Id), Format: DE123456789, at the Finanzamt. How to Berlin has an excellent article about registering for tax Double Taxation Treaty between South Africa and Germany Agreement between the Federal Republic of Germany and the Republic of South Africa for the Avoidance of Double Taxation with respect to Taxes on Income and on Capital Abkommen zwischen der Bundersrepublik Deutschland un der Republik Südafrika zur Vermeidung der Doppelbesteuerung auf dem Gebiete der Steuern von Einkommen Income Tax Act, 1962 – AGREEMENT BETWEEN THE REPUBLIC OF SOUTH AFRICA AND THE FEDERALREPUBLIC OF GERMANY FOR THE AVOIDANCE OF DOUBLE TAXATION WITHRESPECT TO TAXES ON INCOME From SARS Can double taxation occur? The following is quoted from the SARS Website and was valid at the time of publishing- “Yes, if an individual earns employment income in excess of R1.25 million and the double tax agreement between South Africa and the foreign country, if any, does not provide a sole taxing right to one country, both countries will have a right to tax the income. The portion of the income in excess of R1.25 million may end up being double taxed. Generally, under the provisions of the relevant double tax agreement, if an employee renders services in a foreign country exceeding 183 days, both countries enjoy the right to tax the income. The country of source enjoys the first right to tax the employment income and the country of residence, in our case South Africa, will provide double tax relief in the form of a foreign tax credit to the extent that tax was paid in both countries, subject to limitations.” – More information on the SARS Website Relief from double tax? Keep in mind that depending on your situation, if you are over the R1.25 million threshold, you still can claim tax credits for the taxes paid in Germany. The best thing to do is to speak to your tax consultant. The following was quoted from the SARS website and was valid at the time of publishing. “Section 6quat is the mechanism under South Africa’s domestic law to claim relief from double tax where the amount received for services rendered outside South Africa is subject to tax in South Africa and in the foreign country. This credit may be claimed on assessment through an individual’s income tax return, provided certain requirements are met. An employer may at his or her discretion, under paragraph 10 of the Fourth Schedule, apply for a directive from SARS to take into account the potential section 6quat credit on a monthly basis to determine the employees’ tax liability. This will have to be done through a dedicated channel at SARS that will be made available to the public. See the information on Directives under paragraph 10 of the
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