South Africans who work abroad should first consider whether they are still regarded as tax resident in South Africa:
South African Tax Status
Should you be a tax resident in South Africa, you will have to disclose your worldwide income in your South African individual tax return. Many exemptions and deductions may then be claimed against the income that you derived outside South Africa.
Should you not be tax resident, you will only have to disclose your South African source income in your individual income tax return. This will be for instance interest from a South African bank account and income from a property that you are renting out in South Africa. Should you have no South African source income you may deregister from South African tax.
It is important to still ensure that your tax returns are accurately completed. If not, you may find it difficult to answer all the South African Revenue Service questions to their satisfaction when you return to South Africa one day and start submitting normal income tax returns.
South African Tax Planning and Compliance
The basic rule is that, should your affairs be planned well, you will normally not have to pay any additional taxes in South Africa. This is because the way our system is structured and taking into account the various exemptions and relief available. However, where tax matters are not planned and income tax submissions are not kept up to date, we know of many instances where the tax authorities enjoyed a bit of a windfall. Your planning should incorporate the following:
• The income you earn should always be employment income. Should you be an independent contractor, planning should be done to change the nature of your income by for instance the interposition of a company
• Where your investments are located and the type of structures that you are investing in should be considered. It is better, from a tax perspective, to earn South African dividends than foreign dividends and often better to earn foreign interest as an expatriate than to earn South African interest. Also, it is a good idea to reconsider whether your South African retirement annuity, unit trusts etc still makes sense
• Think carefully about how you rent out your South African property to minimise your net rental profits legally and thereby also reducing your income tax payable
• Certain matters need to be considered depending on where you are in life. Retirement planning, share options, non-South African property, donations, whether a legally established trust structure will benefit you, capital gains tax planning etc.
