A change in South African (SA) tax laws is on the horizon, causing many SA expats to re-examine their work-life situation, particularly those 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.
Regions such as the UAE are incredibly popular with SA residents, providing a better life abroad and helping them gain international experiences. According to research from InterNations Expat Insider 2018, over half (55%) are likely to stay abroad forever. In 2008, there were between 40,000 and 100,000 estimated SA residents in the UAE, demonstrating the attraction these countries have.
With this amendment planned to come into effect in March 2020, any South African residents abroad will be required to pay tax of up to 45% on any income earned overseas that exceeds a threshold of R1,000,000. While initially, this may seem a large sum, employment income can include costs that wouldn’t usually be considered including housing and transport – a vital part of the expat lifestyle.
Many expats choose ‘tax-free’ countries for work based on a medium to long-term plan, and don’t currently pay income tax to SARS on any foreign earnings. While there’s still a year left until the changes come into effect, it’s vital that investors get their finances in order.
The proposed changes to the tax law mean that anyone with a foreign employment income would only be exempt from SA taxes if they are subject to tax in the foreign country. As a result, thousands could be hit by the new tax change, especially those in countries such as the UAE. For investors especially, it’s vital to ensure that all of the necessary due diligence is performed, mitigating any issues further down the line.
For overseas investors, the UK market remains a solid investment option despite these changes in tax laws. Rental income is subject to tax in the UK, meaning it would be exempt from any SA tax but overseas investors would still only pay the basic rate of 20%. The stability and potential of the UK market also means it could be more attractive when compared to a competitive SA market – resulting in better yields and higher capital appreciation.
From developments in a thriving Birmingham landscape to the continued growth of the London commuter belt, these regional cores are driving incredible growth and affordability. UK property remains viable for investors that want stability and return on investment. According to the 2019 SevenCapital Brexit Survey, 58% of SA respondents still invest in UK property, with 38% citing capital growth and 28% a stable investment market to be their main priorities.
If you’re considering investing in property, Max Machanik, part of the SevenCapital South Africa team, 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 an attractive vehicle. With London no longer the focal point for investors, SevenCapital assists investors with the knowledge needed of where to look especially 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 achieve good capital growth. SevenCapital, as a leading UK developer, specialises in delivering these opportunities, offering guidance to overseas buyers through every stage of their investment with an end-to-end solution. ”
If you would like to learn more about property investment in the UK, go to www.sevencapital.com.