Over the last 10 years the South African fiscus has introduced numerous changes to the Income Tax Act (ITA) which affect the income tax implications of persons ceasing to be a resident of South Africa. The two main changes were: - The introduction of a world-wide basis of taxation for residents - The introduction of capital gains tax (CGT) as part of the ITA The aim of this treatise was to identify the income tax implications of persons ceasing to be a resident of South Africa. Resulting from this research, several issues in the ITA have been identified, and the two major ones are summarised below. Firstly, upon the emigration of the taxpayer, there is a deemed disposal of a taxpayer’s assets in terms of paragraph 12 of the Eighth Schedule. It is submitted that the resulting exit tax may be unconstitutional for individuals. It is recommended that South Africa should adopt the deferral method within its domestic legislation for individuals who are emigrating. The deferral method postpones the liability until the disposal of the asset. Secondly, on the subsequent disposal of assets by former residents where there was no exit charge in terms of the exemption under paragraph 12(2)(a)(i) of the Eighth Schedule. Depending on the specific double tax agreement (DTA) that has been entered into with the foreign country, taxpayers have been given vii the opportunity to minimise or eliminate the tax liability with regard to certain assets. This should be of concern from the point of view of the South African government. Further issues noted in this treatise were the following: - It is submitted that the term ‘place of effective management’ has been incorrectly interpreted by SARS in Interpretation Note 6. - It is further submitted that the interpretation by SARS of paragraph 2(2) of the Eighth Schedule is technically incorrect. The above issues that have been identified present opportunities to emigrants to take advantage of the current tax legislation. It is further recommended that taxpayers who are emigrating need to consider the South African domestic tax law implications, respective DTA’s, as well as the domestic tax laws of the other jurisdiction, not only on the date of emigration but also on the subsequent disposal of the respective assets.
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:nmmu/vital:8957 |
| Date | January 2010 |
| Creators | Loyson, Richard Michael |
| Publisher | Nelson Mandela Metropolitan University, Faculty of Business and Economic Sciences |
| Source Sets | South African National ETD Portal |
| Language | English |
| Detected Language | English |
| Type | Thesis, Masters, MCom |
| Format | vii, 94 leaves, pdf |
| Rights | Nelson Mandela Metropolitan University |
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