When your financial affairs span more than one country, knowing where you should be taxed can make a significant difference.
In a recent case, SAIL International helped a UK tax resident successfully challenge R10 million in South African tax withheld from a R28 million retirement annuity withdrawal.
The case highlights why understanding double taxation, tax residency and the relevant tax treaty matters when dealing with cross-border finances.
Understanding Double Taxation
Double taxation can occur when the same income is potentially taxed in two countries.
This can become a concern when you move overseas but continue to have income, investments, retirement funds or other financial interests in South Africa.
A Double Taxation Agreement (DTA) between two countries can determine which country has the right to tax certain income, or whether relief from tax should be available.
The important part is understanding how the agreement applies to your specific circumstances.
A real-world example
A former South African tax resident, now UK tax resident, withdrew a R28m retirement annuity. Approximately R10 million was withheld in South African tax, despite the client’s position that the UK–South Africa DTA applied to the withdrawal.
SAIL reviewed the client’s tax position against the relevant UK–South Africa DTA provisions. A UK tax residency certificate was obtained from HMRC, and ongoing liaison with the fund administrator and SARS ultimately resulted in a successful outcome.
The outcome
A R10 million refund for the client.
Did you know?
If you have ceased South African tax residency, the rules around retirement fund withdrawals can differ significantly from those applying to South African tax residents.
Subject to the applicable requirements, including the relevant three-year period after ceasing tax residency, a former South African tax resident may be able to withdraw 100% of a pension, retirement annuity or provident fund as a lump sum.
By comparison, a South African tax resident is generally limited to only withdrawing 33%, with the balance transferred to an annuity and paid out over time.
For anyone living abroad with South African retirement funds, understanding your tax residency and the rules that apply before making a withdrawal can therefore be particularly important.
Cross-border tax – The bigger picture
Cross-border tax isn’t just about where you live. It’s about understanding where your money, assets and tax obligations sit – and how they interact.
Leaving South Africa doesn’t necessarily mean leaving your South African tax considerations behind. Retirement funds, investments, income and other financial interests can continue to create tax implications after you’ve moved overseas.
At SAIL International, we look beyond the tax return
In this case, the numbers were significant and the saving was substantial. But don’t think that just because you don’t have big numbers, this doesn’t apply to you. Cross-border tax can affect you regardless of the size of your financial interests, and understanding your position early can make a real difference.
If you’ve moved overseas, are planning to leave South Africa, or have retirement funds, investments or income connected to more than one country, there may be more to your tax position than what’s showing on your tax return.
At SAIL International, our Global Tax specialists look beyond the immediate tax question. We consider your tax residency, international income, investments, retirement funds and applicable tax treaties to help you understand your position, identify potential exposure and make informed financial decisions.
The right advice isn’t just about dealing with tax when it arises. It’s about understanding the opportunities and risks before they become expensive.
If your financial life spans more than one country, it’s worth understanding the full picture.
Speak to SAIL International
Book a 15-minute consultation with SAIL International’s Global Tax team and start a conversation about your circumstances and where we may be able to help.