The 2021 Draft Tax Bills were published in July last year, which tabled the proposal to tax the retirement interests of South Africans ceasing tax residency. The reason for the proposed tax was that certain tax treaties restrict SARS’ right to tax retirement interests of South Africans once they leave our shores.
Government sought to impose an exit tax to counter the potential loss to the fiscus. But the proposal was met with fierce opposition from industry stakeholders and in particular the Expat Petition Group. The problem with the proposal was, among several others, that it would override South Africa’s international treaty obligations.
It was announced with Medium-Term Budget Policy Statement that the proposal will be withdrawn following the extensive public participatory deliberations with members of the public in Parliament, where the problems with the proposal were ventilated. The promulgation of the TLAA simply confirms the decision to pull back.
Expatriates and those with plans to emigrate must be aware, however, that this may not be the end of the matter. The fact that South Africans are leaving the tax net in droves is in itself a headache for National Treasury and SARS. The idea that many of these individuals take their retirement interests with them, without paying any tax, is a real bugbear for them.
National Treasury and SARS indicated in their Response Document that they will not let this go and further amendments will be considered in the 2022 legislative cycle. What these new proposals will involve is anyone’s guess, because this problem can only be overcome by renegotiating our existing treaties. We will have to wait for the 2022 tax Bills to see if expatriates have a new fight on their hands.
Non-Compliant Property Practitioners to soon be Practicing on Rented Time