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Around 23,000 tax residents leave South Africa each year – and government is about to tighten the noose
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The Budget Review 2021 includes a proposal to impose a deemed retirement withdrawal tax on retirement assets of emigrants as an exit tax.
However, this proposal is unclear and has numerous issues, says legal firm Webber Wentzel.
“Data from various sources suggests that around 23,000 South African tax residents emigrate each year in search of greener pastures,” the firm said.
“Individuals who cease to be tax residents currently pay an exit tax on their worldwide assets, with certain exclusions.
“At present, immovable properties and retirement funds that remain invested in South Africa are excluded from the exit tax net.”
Rich South Africans could be hit with higher taxes next week
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Government will likely be tempted to increase the marginal rates of tax of top earners in the budget being tabled next week – but non-tax measures would be more effective in raising funds for the fiscus.
This is the view of tax experts at legal firm Webber Wentzel who noted that even before the onset of Covid-19, South Africa suffered from three serious social challenges, namely inequality, poverty and high levels of unemployment.
“Coupled with the economically crippling and seemingly unending Covid-19 regulations, looting of state coffers and bureaucratic paralysis within SARS’ collection function, this has created a desperate situation for National Treasury,” Webber Wentzel said.