Expat tax options: FE or TA?

When it comes to choosing financial emigration (FE) or a Double Taxation Agreement (DTA), expatriates must understand that there can never be a one-size-fitsall approach. FE requires certain criteria to be me, while a DTA will only be suitable for certain individuals.

It is cardinal that South Africans abroad know the tax law that affects them and will affect them more once the tax law amendment becomes effective on 1 March 2020.

This process is the simplest, cleanest and most compliant way of ceasing local tax residency.

You may not return to South Africa on a permanent basis.

It ensures that your taxes are fully compliant, and that Sars decides on your tax residency status which they cannot later reverse. You can come back to South Africa and reverse this process yourself without worrying that Sars may attempt to tax you on those years you had been financially emigrated.

Your South African bank account changes from a resident to a non-resident account, commonly known as a “blocked asset” or “capital” account. It is fully functional, but no internet banking.

You are no longer permitted to hold a credit card in South Africa or have personal loans.

Expats must limit their time here to less than 91 days a year to ensure they do not become local tax residents again.

This only applies to an expat that is in a country that has concluded such an agreement with SA.

You do not need to undergo any formal process.

DTAs are less permanent. A person working abroad can apply for it and be fully exempt from paying taxes on their foreign income. Applying for a DTA is a yearly process. Sars often requires a tax residency certificate from the country you are in. Being less permanent, DTAs are riskier.