If, as a South African tax resident, you’re seeking to optimise your financial future, tax emigration could be the strategic move you need.

Franco’s team specialises in guiding affluent clients through the complex process of changing their tax residence, ensuring a seamless transition that aligns with your financial goals.

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Why Consider Tax Emigration?

South Africa’s tax regime can be onerous for high earners, with global income being subject to taxation. By changing your tax residence to a more favorable jurisdiction, you can significantly reduce your tax liabilities and protect your wealth. Here are some key benefits:

  1. Lower Tax Rates: Many countries offer more competitive tax rates, especially on investment income, capital gains, and inheritances.
  2. Asset Protection: Moving your tax residence can enhance the protection of your assets from legal claims and economic instability.
  3. Enhanced Lifestyle: Enjoy the lifestyle benefits of living in a country with a stable economy, high-quality healthcare, and excellent educational opportunities.

Popular Destinations for Tax Emigration for South Africans

  • Mauritius: Known for its low taxes, political stability, and high quality of life.
  • Portugal: Offers the Non-Habitual Resident (NHR) regime, which provides significant tax advantages.
  • United Arab Emirates: No personal income tax and a booming economy make it a top choice for many.
  • Monaco: While exclusive, it offers zero income tax and a luxurious lifestyle.

In South Africa, tax residency is determined by two main tests: the ordinary residence test and the physical presence test. Here’s a detailed look at what makes a person a tax resident in South Africa:

A person is considered ordinarily resident in South Africa if South Africa is the place where they normally reside, meaning it’s their true home. Factors considered in this test include:

  • Intent: Whether the person considers South Africa their real home.
  • Living Arrangements: The nature and location of their permanent place of residence.
  • Personal and Economic Relations: The location of their family and social life, business activities, and property.

If a person is not considered ordinarily resident in South Africa, they can still be deemed a resident for tax purposes based on their physical presence in the country. The physical presence test is based on the number of days a person is physically present in South Africa over a five-year period. A person will be considered a tax resident if they meet all the following conditions:

  • 91 Days in the Current Year: The person is physically present in South Africa for at least 91 days in the current tax year.
  • 91 Days in Each of the Previous Five Years: The person has been physically present in South Africa for at least 91 days in each of the five preceding tax years.
  • 915 Days in Total Over Five Years: The person has been physically present in South Africa for at least 915 days in total over the five preceding tax years.

If all these conditions are met, the individual will be deemed a tax resident from the first day of the relevant tax year.

Exceptions

Even if the physical presence test is met, a person will not be deemed a tax resident if they are physically outside South Africa for a continuous period of at least 330 full days after they cease to be physically present in the country.

Key Points

  • Worldwide Income: South African tax residents are subject to tax on their worldwide income, meaning all income, whether from inside or outside South Africa, is taxable.
  • Non-Residents: Non-residents are taxed only on their South African-sourced income.

Double Taxation Agreements (DTAs)

South Africa has double taxation agreements with many countries to avoid double taxation of income. These agreements typically provide relief through exemptions or tax credits and can affect an individual’s tax residency status.

Understanding these residency rules is crucial for high net worth individuals who are considering their tax emigration options, as residency status directly impacts tax liabilities. Consulting with tax professionals can ensure compliance and optimal financial planning.

Franco’s team & location-specific partners provide comprehensive services, including:

  • Personalised Consultation: We assess your unique financial situation and objectives to recommend the best jurisdiction for your tax residence.
  • Legal and Tax Compliance: We handle all legalities and compliance issues, ensuring your transition is smooth and fully compliant with international regulations.
  • Residency and Citizenship Programs: We assist in acquiring residency or citizenship in your chosen country, streamlining the process from start to finish.
  • Ongoing Support: Our commitment doesn’t end with your relocation. We provide continuous support to ensure you remain compliant and make the most of your new tax status.
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