From 1st March 2020, reformed income tax laws are coming into effect for South African tax residents.
This means that foreign-earned income over the 1 million Rand (ZAR) tax-free threshold may become taxable at a rate of up to 45%.
This has left many South African yacht crew with growing concerns over what to do with their hard-earned money.
Scaremongering within the industry has become rife.
A lack of understanding is only being fuelled further by misinformation being passed through by companies and other crew members who profess themselves to be experts on the matter.
In this article, we explore the details of this legislation change and what direction South African residents can take moving forward.
Read on to learn more or click a jump menus below to skip to a chapter that interests you.
- Resident vs Non-Resident
- What Are The Options?
- Should You Cancel Your Social Security Number?
- Get Expert Help
- Speak to Us or Comment!
Resident vs Non-Resident
Large numbers of crew are opting to become non-resident for tax purposes so that they are free to earn over R1million in more sympathetic tax regimes, or by maintaining a position of complete worldwide non-tax-residency.
This may however not necessarily be the best course of action in your circumstances although some companies may suggest it to be so, advising that you use their financial emigration management services in order to further their own agenda.
For more information on the new tax legislation in South Africa, and how this may affect you, read our comprehensive article covering changes to foreign earned income tax exemption in South Africa.
What Are The Options?
If you do wish to become non-resident for tax purposes, financial emigration is an option being examined by many.
It’s important to remember however, that a full financial emigration is not your only option.
The process of financial emigration allows you to confirm your status as a non-resident but with a requirement to sell or relocate all financial assets that you may hold in South Africa.
With some companies now promoting the use of this system, potentially as a means to draw clients to use their services when it may not be necessary, it is important to ensure you understand the implications and costs of this undertaking before moving forward.
Should You Cancel Your Social Security Number?
In many cases, lodging an application with SARS to cancel your Social Security number will be less time consuming, certainly less costly, and will have the same end result.
Furthermore, Aletta Theron of Capitax also points out that:
“Seafarers are not affected by the new law change and all their earnings will be exempt from tax in the future in SA on one proviso, that they obtain 183 days outside the SA borders from 1 March 2020 to 28 February the following year. Financial emigration is therefore a fruitless expense for a crew member”.
This highlights the fact that companies are now taking advantage of the fear and uncertainty felt by many crew members, in order to promote their services whether they are necessary for the individual in question or not.
Get Expert Help
If you do still wish to examine a position of non-residency, it is important to remember that you must also meet the South African residency tests in order to be deemed non-resident for tax purposes.
Put simply, financially emigrating is not sufficient to achieve this.
Speak to Us or Comment!
For a complimentary and in-depth review of your individual circumstances and advice on whether you need to take action with regard to your tax affairs, get in touch with us today or let us know your thoughts in the comments section below.
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Changes to Foreign Earned Income Tax Exemption in South Africa
Any advice in this publication is not intended or written by Marine Accounts to be used by a client or entity for the purpose of (i) avoiding penalties that may be imposed on any taxpayer or (ii) promoting, marketing or recommending to another party matters herein.