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[FAQ] South Africans working in Netherlands
- 22 March 2023
- International Tax
- The Tax Faculty Tax Specialist
This article is based on tax law for the year ending 28 February 2023.
Background
A taxpayer has moved to the Netherlands. I advised that he should inform SARS that he is now a tax resident in the Netherlands which he hasn't done as yet. The taxpayer’s Financial Advisor has advised that he needn't inform SARS as it could get complicated with tax - CGT in particular in that the value of his assets here (excluding his house) will be effectively realised and he'd be liable for CGT on any gains and the same would apply if he returns to SA. I was also told that he has 5 years to inform SARS of his non-residence for tax purposes in case his move away is only temporary and the DTA between The Netherlands and SA is sufficient to protect him from having to pay tax in SA (except for his SA house rental and bank interest) while he's away. Would greatly appreciate your opinion/advice.
Answer
There are two processes, the one being emigration and the other being non-resident. It is possible as you know for the taxpayer to be regarded as a non-resident for tax purposes, while not having emigrated. The tax implications as you mention are different. Emigration brings CGT into play and being a non-resident does not, but affects the PIT regime.
Emigration from South Africa is not compulsory, but others specialising in emigration and emigration law might have a different view and it is advisable for the taxpayer to take formal advice about his obligations. The taxpayer would need to consider that emigration affects his worldwide assets and if that is done later rather than earlier it could have implications when the decision to emigrate is finally made.
The DTA with the Netherlands is likely to determine that the taxpayer is a non-resident for tax purposes and his tax returns filed according to the provisions. If he is employed in the Netherlands it will resolve the double taxation issues that he will face if he is taxed by SARS as a resident.
Therefore, separating emigration from being a non-resident and dealing with his tax affairs as a non-resident, then considering a DTA in formulating his tax position would be most helpful to the taxpayer.