By: Tax Consulting SA
The approval of the controversial National Health Insurance (NHI) Bill has sparked significant concern across various segments of the population. Medical professionals are apprehensive about potential mandates to work for the government, families with at-risk members fear for their loved ones’ care and taxpayers are worried about the financial implications. The factors have collectively prompted a surge in enquiries within our expatriate tax firm regarding private health care abroad as well as relocating their tax residency.
Option 1: Residence and Citizenship by Investment
If you are choosing to stay in South Africa but seeking a back-up plan, investment migration offers viable options. By participating in residence or citizenship by investment programmes, families can secure improved travel and economic mobility, diversified opportunities and a safeguarded physical and financial future.
With the NHI Bill’s implementation, safety, security, first-class health care, reliable infrastructure and better family prospects have become paramount considerations. For those looking for a Plan B or a future exit strategy, countries boasting excellent private health-care systems, such as Australia, Canada and Switzerland, have emerged as attractive destinations for investment migration. The countries offer residence rights with a route to citizenship for investors and their families in exchange for substantial investments.
According to the Henley Ultimate Portfolio, the following countries, which all offer investment migration programmes that are popular among South Africans, score higher out of a 100 in the private health-care parameter than South Africa:
- Australia: 76
- Canada: 76
- Switzerland: 74
- New Zealand: 58
- Italy: 50
- Portugal: 50
- Malta: 41
This stands in stark contrast to South Africa's score of 25, again reinforcing the need for South Africans to look abroad.
Option 2: Financial Emigration
For taxpayers seeking to physically move abroad, ceasing your South African tax residency allows you to successfully cut ties with Sars thus avoiding the impact of the implementation of the NHI Bill altogether. Financial Emigration is the process used by many South Africans abroad to formalise their non-resident tax status for tax and exchange control purposes. It is important to understand that simply moving abroad does not negate one’s obligations to Sars unless the formal process is successfully completed. Cessation of tax residency allows you to protect your foreign-earned income from being taxed by Sars, along with many other benefits. The freedom entails a complex step-by-step process, including obtaining a Sars Notice of Non-resident Tax Status Letter.
Remittance of funds
Both options above inevitably lead to the remittance of funds abroad. A crucial component in the process of financial emigration and investment migration is the Approval International Transfer PIN (AIT PIN) in order to allow you to successfully transfer funds abroad. The introduction of AIT on April 24, 2023 saw several changes to the Tax Compliance Status (TCS) process, including the consolidation of the “Emigration” TCS pin and the “Foreign Investment Allowance” TCS Pin to create the new “Approval for International Transfer” (AIT) TCS PIN. It is important to understand how to go about applying for this PIN as well as the difference between applying for an AIT PIN as a South African tax resident versus as a South African non-resident taxpayer as Sars’s strategic intent focuses on the source of funds, statement of assets and liabilities as well as the where the funds will be going to.
Compliance is critical
The implementation of the NHI Bill continues to prompt knee-jerk reactions from taxpayers. However, before one seeks relief abroad, a critical starting point is ensuring overall tax, legal and financial compliance, with the AIT PIN reinforcing Sars’s compliance strategies. This entails detailed planning, compliance checks and strategic financial planning. Highly skilled tax experts are best placed to identify and remedy any non-compliance that may arise. Skipping this step may have dire consequences and setbacks in one’s journey to successful financial emigration or residence or citizenship by investment abroad.
* Tax Consulting SA is a firm which specialises in Individual and Corporate Tax Planning and Compliance.
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