In this next episode of the debate around expat tax, I thought it would be a good time to chat around, arguably, the most important part of this whole scenario.
South Africa has an agreement with the UK (and many other countries) that prevents people having to pay tax twice – once in SA and once in the UK.
The importance of this is that most people who are worrying about expat tax are not even aware of these Double Taxation agreements (called Conventions). Once you fall within the rules governing the agreement then you should only be taxed in one place.
Looking more specifically now at the UK/SA agreement it revolves around where you live and work. The residence test decides with whom you will be sharing your hard earned cash. It looks specifically at domicile and residence with the latter looking more closely at:
Where you have a “permanent home”;
Where your “personal and economic relations” are;
Where you have your “habitual abode”; and/or
Where you are a “national”.
If, like me, you have business interests in both countries then they look at where you have spent a combined period of 183 days or more in any tax year.
In most cases it becomes fairly clear where you should be taxed but, if all else fails, then the 2 countries will have to “agree” with each other who is going to take your tax from you.
The most important point here is that you need to be telling them both that you are paying the one or the other and making sure you claim all the right deductions. In this instance, silence is definitely not golden!!!
Having said all that, there are some types of income that will remain taxed in South Africa but also fall into the UK tax net. These include:
The upside to that is the UK taxing authority allows you to deduct tax you paid somewhere else in the world (like South Africa) from the tax you owe in the UK (and vice versa).
Bottom line of all this is that you WILL be paying tax when you are working or have some other form of income! Most importantly, though, you won’t be paying tax on the same income twice provided you tick all the right boxes on your respective returns.
Given the complex nature of all this you really should be using a tax professional to guide you through and make sure you do tick the right boxes. Remember, that just because you have physically departed from SA doesn’t mean SARS know you have departed so, as far as they are concerned, you owe them returns and money until you tell them otherwise. Even if you left 15 years ago, if you haven’t told them then they still want to hear from you.
Like the water in the Rime of the Ancient Mariner, there are taxes taxes everywhere and it takes a lot of expertise to make sure your wallet doesn’t shrink! So, contact us, and we will gladly guide you through the processes whether you want to keep all the doors open or shut one very tightly.