Tax Residency Of Former South Africans Returning To South Africa After Many Years

Tax Residency Of Former South Africans Returning To South Africa After Many Years

• 11 April 2024
• Accounting
• The Tax Faculty Tax Specialist

This article is based on tax law for the year ending 29 February 2024.

1. The Problem / Facts

a) If an individual permanently returns to South Africa after 20 years, will they be regarded as a tax resident of South Africa if they meet the requirements of section 1 of the ITA regarding "residency" or either in terms of the double taxation treaty?

b) Will the assets on which the exit charge was paid be incorporated into the total assets as a resident if the individual's residency is changed to a resident of South Africa for tax purposes again?

c) If the person becomes a tax resident of South Africa, what are the tax implications when an asset is sold on which Specifically, is the deemed capital gains tax credited and offset against the capital gains tax payable at the actual disposal of the asset?

2. Applicable Law 

Income Tax Act 1962, Section 1, Eighth Schedule.

3. Application of the Law to the Facts

a) Residency by way of ordinary resident, physical presence test and DTA.

b) Once tax resident in SA, worldwide assets and worldwide income is taken into account.

c) As this was a deemed disposal albeit to the taxpayer, the new base cost will be the value of the assets that were used in determining the deemed gain, upon which CGT was calculated.  Keep all the historical records to substantiate the base cost when the assets are finally disposed of to a 3rd party or in the unfortunate event that a deemed disposal is made to the deceased estate of the taxpayer. 

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