sueannejoe

South African expat tax law

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LidiaS77

Hi @sueannejoe,

There will probably be no implications. The reason for this is the double tax treaty between Canada and South Africa. When you have to decide in which country to pay tax you should firstly look at the conditions of the treaty to determine which country you are a resident of. The rules in the treaty takes precedence over either country's domestic laws so even if South Africa changes any of its own laws it does not affect the treaty. The problem comes in if they change the treaty, which they don't plan to do at the moment as far as I know. So, according to the treaty if you are somehow considered a resident of both Canada and South Africa then you will be considered a resident of Canada only, if you have a permanent home in Canada and not in South Africa, for the purposes of the treaty. This means that you have to pay tax in Canada only. So it doesn't matter if SA also considers you a resident, if you have a home in Canada and not in SA then you are considered a resident of Canada only, when deciding where to pay tax. If you are a resident of Canada only then you pay tax in Canada only. There are some exceptions e.g. for other types of tax so it might be worthwhile to read through and make sure that you are not somehow affected if you receive other types of income such as royalties in SA, renting out property in SA etc. Being a resident of a country for tax purposes is completely separate from your status as a "citizen", "tourist", "permanent resident" etc. So you can be a citizen of SA but not a tax resident, and a tax resident in Canada but not a citizen etc.

Edited by LidiaS77
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Gary van der Westhuizen

I will start by saying I am not a Tax expert, nor I have I read the Tax treaty in detail. I completely agree with @LidiaS77 I do think though that you need to keep in mind, at least my experience has always been, with SARS you pay first and argue later. Which could mean, you will pay tax in both jurisdictions, and then you need to prove to SARS you paid tax in Canada, after which you can then claim a refund. Said refund, will have to probably be into an SA bank account, which they could ask you to be RICA'd for...  We financially emigrated, and they still messed it up, I have been fighting them for about 6 months, without any luck. 

I am sure this won't affect most people, but maybe just another reason to finally call it quits. As Lidia mentioned, there is a difference between a tax resident and a citizen. You can financially emigrate and keep your SA passport. 

 

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LidiaS77

Just to clarify, I'm not a tax expert either but had to consult with various tax experts and read a lot to understand what should be done in our situation. @Gary van der Westhuizen I don't think you would physically pay tax in both countries (that could be all your money lol). For a few months after moving here I received a salary in SA with PAYE already deducted, so paying tax to SA. When submitting my tax return in Canada I was able to claim a "tax credit" in Canada because I already paid tax to SA on that income so I didn't have to pay tax again on that income in Canada. The same with submitting a tax return in SA - earning money in Canada now I can claim a foreign income tax exemption, which is not a refund but rather an amount with which they reduce the tax that you owe them. This is just for normal income tax, it gets more complicated with other types of tax.

Edited by LidiaS77
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LidiaS77

I don't know if this has been posted before, but here is an article that describes the situation with the new Expat Tax law and the double treaty in the same way that my own research has shown. He also says that if you are deemed a resident of Canada then you would not need to pay any tax to South Africa on your regular income.

 

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novascot

Hi Lidia, when you say "you decide", are you saying we can decide for ourselves in which country we pay the tax? So I could choose the one where i would pay less tax? Surely the other country will still want you to pay them the difference in tax? Isn't this the whole point of the new expat tax law? 

Do you know if it makes any difference whether you have permanent residence or just a work permit? 

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LidiaS77
Posted (edited)

Hi @novascot, I should have said "you have to determine" instead of "you have to decide". If you closely study the conditions of the treaty you will see that they try to make it obvious to which country you should be paying tax depending on your residency and other specific circumstances. Your decision on where to pay tax is not based on what is more convenient to you but rather based on what the treaty says. According to the treaty, for personal services (including a salary) you can only be taxed in both countries if you work in both and spend a certain amount of time in both. If you only physically work in Canada and is considered a resident for tax purposes in Canada then you will only pay tax to Canada (even if you receive a salary from SA, like we did for a while). This might be different for other types of income.

I haven't studied the new proposed ex-pat law in great detail, but there are no changes that the government can make to South African domestic laws that can change or override the conditions of the double taxation treaty. They will have to change the actual double tax treaty and get Canada to agree before this will affect someone who is considered a resident of Canada for tax purposes. Your status as citizen, permanent resident, work permit etc. is something different and separate from your status as resident for tax purposes. I know it might be tedious but if this affects you I would really recommend starting with Article 4 of the double taxation treaty and closely looking at the definition of a resident and determining whether South Africa or Canada sees you as a resident for tax purposes (it is obvious that the treaty tries to word it in such a way that it has to be one or the other, not both). If you have homes in both SA and Canada and your "centre of vital interests" is somehow in both then you will pay tax to SA if you are a national of SA only, regardless of whether you are on a work permit or have permanent residence in Canada (that is, unless you physically work in both countries in which case you might pay tax to both).

After submitting our 2017 tax returns we were assessed and asked for additional proof for some of the claims we made so the CRA does look at this closely.

Edited by LidiaS77

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Jules

Massive difference between an expat and a permanent resident. Expats eventually go back home - PRs eventually become citizens in the new country that becomes their new home. 

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