We’ve all made peace with the inevitable – death and taxes – and become used to change being the one constant reality in life. South Africans living in Australia, New Zealand, United Kingdom and Germany are about to face a new reality…the change in how double taxation treaties are being interpreted by these jurisdictions!

Until recently these countries allowed the economically fair tax provision: if you’ve paid tax on pension income in South Africa you enjoyed a tax credit in your new home country. Lekker! However, the “treat” in treaties is being taken away leaving it to the pensioner to claim its own refunds in South Africa. Ouch!

These countries will recover tax on the gross South African pension earnings, no exception. Which means exemptions and directives to not pay tax has to be granted at source, in South Africa. The key word used, used to be accrual or arising in the UK, which meant your taxes were paid back home. In future the focus, or rule, will be on remittance meaning pensioners will be paying tax on pension in the new home country.

What to do to avoid double taxation? One of two options prevail:

  1. You’ve decided live abroad, so the simple solution is to change your status to non-residentthrough financial emigration, which means you’re no longer a tax-resident of South Africa and officially free of paying tax back home. In the process you don’t lose your South African citizenship, or birthright and are entitled to retain your passport. To start the process register here
  2. You need to make application for tax exemption or apply for a tax directive in South Africa, which is possible, but time consuming and know-how dependent. If time is of the essence and you are facing know-how or risk aversion issues, why not contact our tax advisors for professional assistance in the matter?

The net result: SARS never budgeted for the unforeseen flood of directive and exemption enquiries. The reality: no matter what, we all have to pay tax on income – somewhere and once. Where we pay tax is no longer our choice. We do, however, have freedom of choice of where we want to live, which is where we’ll need to pay tax. It’s called change.

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