Real Estate Investor Magazine South Africa April/May 2019 | Page 54

UNITED KINGDOM
Expat Tax Laws
and South African
Investors
S
outh African residents have a long history of emigrating
around the world - with an estimated 4.3 million SA cit-
izens moving over the last 20 years. As a global developer,
SevenCapital has offices in both the UAE and South Africa,
working to help overseas investors find the ideal UK-based
properties which meet their investment strategies and goals.
Between an estimated 40,000 and 100,000 SA residents
resided in the UAE during 2008. These numbers have
consistently grown, to the point where the South African
newspaper Independent Online officially dubbed the UAE
‘South Africa’s 10th province’. A large majority of the SA expats
in the UAE move to find a better life abroad, gain international
experience and according to InterNations Expat Insider 2018
research, over half (55%) are likely to stay abroad forever.
However, a change in the SA tax laws is causing South
African expats to examine their work-life situation, especially
those working in ‘tax-free’ countries such as the UAE.
The amendment to the South Africa Income Tax Act No.
58 of 1962 has been fully enacted and, as a legal amendment,
will officially affect all SA expats.
This amendment states that any South African tax residents
abroad will be required to pay a tax of up to 45% on any income
earned abroad that exceeds the threshold of R1,000,000.
While this seems like a large threshold, employment income
can also include benefits that wouldn’t usually be considered
earnings, such as housing and transport costs that come as part
of the expat lifestyle.
Fortunately, this law comes into effect on 1 March 2020,
giving expats time to get their affairs in order before the
changes come into place. Many expats choose ‘tax-free’
countries such as the UAE to work on a medium to long-term
basis, avoiding paying income tax to SARS on any foreign
earnings.
For many overseas investors, investing in the UK remains a
solid option despite the change in tax law. As rental income is
subject to tax in the UK, it would be exempt from SA taxes,
but investors would still only pay the basic rate of 20%. Market
conditions in the UK can also offer more lucrative returns than
the more competitive SA market, delivering better yields and
higher projected capital appreciation.
From developments in a thriving Birmingham landscape
such as 105 Broad Street and St Martin’s Place to London
commuter belt hotspots such as Slough and Basingstoke
which are driving incredible growth and affordability. UK
property remains viable for investors that want a stable market
and returns on their investment.
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APRIL/MAY 2019 SA Real Estate Investor Magazine
Currently, in an exemption designed for employees
of private-sector companies, any SA resident working in
a foreign country for more than 183 days a year is exempt
from paying income tax on their foreign employment income.
However, if a resident works in a foreign country for more
than 183 days and has no tax payable in a foreign country,
any foreign employment income that’s earned benefits from
‘double non-taxation’.
The proposed change would mean anyone with a foreign
employment income would only be exempt from SA taxes if it
is subject to tax in the foreign country.
This means many South African expats, especially those
working in the UAE, would be considered SA residents even
if they spend over the required amount of time outside of
the country. As a result, thousands could be hit by this new
tax change. For investors, it’s important to ensure that the
necessary due diligence is performed, helping mitigate any
issues down the line.
If you’re considering investing in property, SevenCapital’s
South Africa office, led by Wayne Morris, has these thoughts:
‘South Africans looking to invest their money outside of
the country should view the UK property market as both a
safe haven and a lucrative vehicle. With London no longer
the focal point for investors, SevenCapital can assist potential
investors with the knowledge needed of where to look if you
don’t live locally.’
‘There are many great investment opportunities just outside
of London in Birmingham, Oxford and Slough, which
one can get into at a lower price point but still offers good
capital growth and a hedge against the rand. SevenCapital,
as a leading UK developer, specialises in delivering these
opportunities, guiding overseas buyers through every stage of
their investment.’
If you would like to learn more about property investment
in the UK, go to www.sevencapital.com.