Newsletter 71 (Mar 2023)
In the words of Oscar Wilde: “And all at once, summer collapsed into fall”. Once again, the trees will shed their leaves in a cascade of russet and amber. Autumn personifies hope as it reminds us of the ever-changing seasons and shows us just how beautiful it is to let things go. With the change and dying off of the leaves comes the promise that nature will arise again in her full splendour. In our own lives, we can experience this hope in the promise of change or by being content with where we are in our journey right now.
“HOPE is the one thing that can help us get through the darkest of times.”
“BELIEVE IN YOURSELF and all that you are.
Know that there is something inside you that is
greater than ANY OBSTACLE thrown your way.”
“You are new too old to set another goad or to dream a new dream."
On Thursday, 27 April 2023, we will be celebrating Freedom Day.
But what does this day mean to us as South Africans?
Freedom Day does not only commemorate South Africa’s first democratic election, but also celebrates our right to exercise our own choices and individuality. This extends to allowing others to live the way they want to live, to look how they want to look and to be what they want to be.
We wish you a happy Freedom Day filled with celebrations around your own uniqueness as well as the uniqueness of those around you!
THE INTERPRETATION OF ‘LIMITED RIGHTS’ PROVISIONS IN A WILL
Read more about this in the next edition
TAX RESIDENCY AND THE ABILITY TO RECEIVE A SOUTH AFRICAN INHERITANCE
The idea of a loved one passing away is never an easy thing to think about. Unfortunately, death is as part of life as life itself, and part of life’s journey. With the occurrence of this unfortunate event emerges the handling of the deceased’s estate.
The administration of a deceased estate can be a very complicated and a time-consuming process, which could lead to a lot of frustration for many South Africans. When an heir is an expatriate as well, it adds additional complexity and often more frustration to the process.
An heir living outside of South Africa who inherits from a South African source, will have to provide proof of their non-tax residency and compliancy status to enable them to receive their inheritance overseas. The expatriate would have had to place their emigration on file to be able to receive their inheritance.
The South African Revenue Service (SARS) will require an heir to go through a formal declaration process to prove their non-residency based on the qualifying criteria to be acknowledged as a non-tax resident.
How to cease tax-residency in South Africa
An ordinary resident is a person considered to be ordinarily a resident in South Africa, if South Africa is the country to which that person will naturally and as a matter of course return to after roaming outside of the country. It could be described as that person’s usual or principal residence, or their real home, and determines their tax residency status.
When a person intends to permanently relocate to another country, there is a once-off process whereby taxpayers can cease their tax residency. To be able to prove non-residency and formally cease tax residency, a person must go through a financial emigration process, should they meet the criteria. If the intention of the person can be substantiated objectively, the person will pass the ordinary resident test and will qualify to cease their tax residency.
The source-based tax system in South Africa was replaced with a residency-based tax system in 2001. This means that a person can now be classified as a resident or a non-resident for tax purposes. A resident for tax purposes is taxed on their worldwide income and a non-resident for tax purposes is taxed on their income derived from a source within South Africa.
The way SARS determines the tax residency of an individual in the country who was never ordinarily resident in South Africa, is by applying a physical presence test. The presence test is determined by the following:
The individual must have been present in South Africa for:
A period or periods exceeding 91 days in aggregate during the current year of assessment; and
A period or periods exceeding 91 days in aggregate during each of the five years preceding the current year of assessment; and
Exceeding 915 days in aggregate during the five years preceding the current year of assessment.
This test is seen as a secondary test to the ordinary test. It should be kept in mind that the onus always rests on the taxpayer to prove to SARS that they qualify based on the above options. It is a good idea to trust people who are experienced with this complicated and technical process, to assist with this type of matter.
Releasing the inheritance
The inheritance funds will be blocked until such a time as the taxpayer has fulfilled their obligation in terms of proving their tax residency status. Once the formal emigration has been declared and approved by SARS, an emigration tax clearance status PIN will be provided which will be used as a clearance certificate to release the inheritance, and may be used to remit the inheritance abroad.
Inheritance tax does not apply to individuals living within South Africa, but the inheritance must be declared to SARS, both for South African tax residents and tax non-residents alike.
Cheers old pals
Roger Brown, a retired engineer, had quite a few good friends. The group of seven had been close friends for more than 40 years. When he passed away, Roger surprised his closest pals by leaving £3,500 in his Will for them to spend on a weekend away. They went to Berlin and raised more than one glass to Roger’s memory.
One of his friends, Roger Rees, told a local newspaper that: “We would like to formally apologise to Roger’s two sons, Sam and Jack, for taking away some of their inheritance. We spent most of it on beer, the rest we wasted.”
Until next time!
“The Legatus Times” Team