By Amanda Visser
Top skills and big money are leaving South Africa daily. Never to return. A small Western Cape immigration firm that has not dealt with a single emigration application ten years ago now assists at least one family a month to leave the country.
Hugo van Zyl, Independent Tax and Exchange Control Specialist, says he has advised more than 3 000 clients about emigration and has assisted at least 500 to go through the motions. Some of these clients have been taking R20 million per couple out of the South African economy. Around 60% of his clients who tax emigrated are either professionals, academics or highly skilled technical people who left the country for work opportunities. Another 10% are retirees and around 30%, who are now tax emigrating, have left the country many years ago or were born abroad. “Tax and formal emigration are not indicative of temporary departures. Instead, it indicates that people do not intend to return or that they found it impossible to return, be it because of crime, black economic empowerment or age.”
Van Zyl says there is a noticeable increase in black, Indian, coloured and Chinese people leaving the country. Crime is sighted as the main reason. Second-generation expats returned to South Africa in the late 90s (as dual citizens), extremely optimistic about the new South Africa. He assisted them in 2003 with the tax and exchange control amnesty. Now the majority of these amnesty clients are leaving or have already left. Van Zyl says one of his clients is emigrating to escape the so-called black tax.
For the money
Tania Copeland, Director of Ties Immigration, says she has also seen an increase in young graduates leaving the country for better opportunities and families relocating because of safety and security concerns. About half the families they have been assisting with the emigration process plans to start a business in their new home country, creating new job opportunities elsewhere. Her firm has only assisted two retirees who left for the Philippines to get married.
Copeland says they are seeing more and more young graduates leaving shortly after finishing their studies. Young professionals are earning more than R50 000 per month in their foreign jobs. Families who are leaving are wiping their financial footprint in South Africa. In her experience – given the current exchange rate – the very minimum amount leaving the country is R3 million per family.
Tax emigration
Law firm Bowmans says emigrants who cease to be tax resident and transfer between R1 million and R10 million need to apply for a Tax Compliance Status. In terms of the old emigration rules, a couple were allowed to take R20 million per annum out of the country without any approval from SARS.
“It is quite possible that we will now see much larger amounts leaving the country and an increase in people putting their tax emigration on record,” says Van Zyl.
Retirees and second-generation expats are now forced to tax emigrate using the newly announced tax emigration clearance process to transfer any amount of funds from South Africa. The increased number of tax emigrations are all expats who have been outside South Africa for some time.
Changes to the tax treatment on their foreign earnings above R1,25 million have led to expats making use of tax treaty benefits. They have moved their habitual home or “centre of vital interest” to a treaty country, like New Zealand, Spain and Portugal. This allows them to escape the South Africa tax net.
Pre-legacy planning
Van Zyl says many South Africans are now doing “pre-legacy” planning. “They are transferring money directly and indirectly to the children living abroad to buy the property or family business in South Africa. Expats are keen to pay the tax now and remove their administrative footprint as they consider the South African bureaucracy the worst on the continent.”
