Financial Emigration. We have clients living in the UAE that have been working there for over 15 years. They are not physical present in the country for more than 91 days. They have RSA assets. They have a letter from the authorities in the UAE that they
Important:
This answer is based on tax law for the year ending 28 February 2018.
Answer:
It is our understanding that the term ‘financial emigration’ is the process whereby a South African resident changes their status with the Reserve bank to a non-resident. The RSA Reserve Bank guide refers to ‘individuals regarded as residents by the Financial Surveillance Department who are leaving South Africa to take up permanent residence in any country outside the CMA’ – paragraph 4.1. Paragraph 4 of the guide deals with the process to be followed in this regard. It is not a tax related issue and best referred to an authorised dealer.
From a tax point of view, Article 4 of the RSA UAE treaty is relevant, and it makes no reference to 91-days. For the individual to be a resident of the United Arab Emirates, article 4(1)(b)(i) is relevant. It refers to the fact that it would be “any individual who, under the laws of the United Arab Emirates is considered a resident thereof (i.e. the UAE) by reason of that individual’s domicile, residence, place of management or any other criterion of a similar nature”.
We submit that the letter that you refer to, even where it is issued annually, would mean that the individual, under “the laws of the United Arab Emirates is considered a resident thereof by reason of that individual’s domicile, residence, place of management or any other criterion of a similar nature”. If the person has not formally left South Africa, i.e. emigrated or no longer ordinarily resident in the RSA, the tie breaker clause will have to be considered. In other words, where the individual is liable to tax in the RSA by reason of that person’s domicile, residence, or any other criterion of a similar nature. This term does not include any person who is liable to tax in South Africa in respect only of income from sources therein – you refer to “RSA assets” (a source in the RSA). For purposes of the tie-breaker, the country where a permanent home is available to the individual, will be, in the first instance, be important.