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A sneaky capital gains tax trigger you might not be aware of

Updated: Oct 21, 2021

With emigration being a fairly popular pass time for South Africans these days, you would do well to know the impact of the decisions you need to take along the way if you are joining "the leavers".

Whilst none of us has a crystal ball and we are all completely unable to predict the future impact of the emigration decision, there are definitely a few variables that you can control. One of those is your decision to remain as a South African taxpayer or not.

One of the VERY important things you should be aware of is that when you tick that block on your next SA tax return that says you are no longer a South African taxpayer you trigger a "deemed disposal" of all your South African assets except your immovable property,

So, for example, if you still own shares in your own trading company that you intend to keep operating from overseas, the deeming provisions for tax emigrants mean that you are deemed to have sold your shares at their current market value the day before you leave and then immediately re-acquired them at that price. So, let's say the shares in your business were worth R1m the day before you migrate and you started that business from scratch. That means you have no base cost to deduct and the whole R1m will be included in your income tax return as a capital gain and taxed accordingly. It's not quite that simple because there could be another option but you get the picture, I hope.

Let's take away the option and say you have a portfolio of listed shares that you've built up over the years. Same rule applies - the market value the day before you migrate less the cost of those shares gets added to your capital gains tax calculations for that year with no "get out of jail free" cards you can use.

And what about those Kruger Rands you have been buying for years and that you pop in to your luggage as a very portable asset. The day you migrate, that's a deemed disposal of those Kruger Rand.

Then there's your personal residence that you couldn't sell so decided to rent out. It's not first prize but at least you have a tenant! Yippee. And, fortunately, it's fixed property so no "deemed disposal". Yippee again!!! Sadly, it doesn't end there. As it's no longer your personal residence you just lost the R2m personal residence allowance for the gain you make when you do eventually manage to sell it.

There is SO much to do and to consider and to sort out when you migrate. You would do well to invest in a good tax advisor's time well before you leave so you can ensure that the things you CAN control go the way you need them to go.

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