Tax Residency for South Africans living in Canada

Immigration. The thought can send shudders down one’s spine! All the tiny details and large, looming decisions that must be handled can get overwhelming. And contrary to popular belief, it’s not over when you’re sitting snug on the plane. The real work starts when you’ve got to build, and rebuild, your life in a new nation – under new laws and regulations, and within a totally different culture. From the small things like where to grocery shop, to the larger context of Tax Residency for South Africans living in Canada, it can all become a conundrum of confusion.

I distinctly understand this dilemma – excitement and dread ran equally through my veins when I moved from South Africa to Canada with my wife and three children. Over the years, we’ve navigated the rapids of immigration and have flourished as a family. I’m determined to help others do the same.

I’m a South African by birth, an Actuary, and I’m passionate about simplifying finances according to a trusted roadmap. So, if you’re wondering what comes next in terms of your financial planning here in Canada, what life insurance to get or how to navigate financial immigration, we are here to help. My team and I bring over 30 years of financial services experience to assist your family with your unique challenges, questions, and plans on this exciting, yet daunting, journey of immigration. My intrinsic understanding of the South African context, as well as the Canadian one, is useful when it feels like you’re straddling two countries and making sense of the brand-new regulations, rules and acronyms.

The best thing you can do is understand where you’re at and draw a picture of where you want to be. The Wealthstack Dashboard will help you do that.

Once you’ve got your Dashboard up and running you can start tackling the larger questions like Financial Immigration, saving for the future and my personal favorite, tax residency.

So, we’ll start with my top tips on Tax Residency for South Africans living in Canada:

1. Tax Residency Remains for Both Countries

   It’s good to note that, by default, you will be a tax resident in both South Africa and Canada, unless you deliberately give up your country-of-origin tax resident status.

2. Taxable Income Impact

   As of 1 March 2020, South African Tax Residents are required to declare worldwide income to the South African Revenue Service (SARS). Meaning that you will declare to South Africa what you have earned in Canada in the same way that you declare to the Canadian Revenue Agency. If your tax rate in South Africa is higher than your rate in Canada, you will pay additional tax on your Canadian income in South Africa (this will include the allowance for the double tax agreement between the two countries)

3. Cashing in Your Assets

   The best time to cash in your retirement assets in South Africa is BEFORE you become a tax resident in Canada. It’s important to understand that this is not necessarily a good idea, but if you want cash in your assets, it’s best done in this order.

4. Tax Residency & Financial Emigration

   It can get confusing, but your tax residency status is not directly linked to your citizenship in South Africa – in other words, you can be a South African citizen but not a tax resident (and vice versa). It’s also good to remember that gaining tax residency in Canada is not the same as financially emigrating. Financial emigration is a few more steps along the way, we’ll cover that topic in another article, or contact me directly to chat through your unique journey

5. Giving up your Tax Residency

   If you choose to give up your tax residency status in South Africa there will be a Capital Gains Tax implication on your discretionary assets (other than fixed property and retirement assets). The market value in South Africa will become your base cost in Canada again.

6. Tax Residency & Tax Returns

   Once you are a non-tax resident in South Africa, don’t forget that you will still need to file a tax return in South Africa for any income earned there.

These are my six top tips when it comes to Tax Residency for South Africans living in Canada, but I imagine you might have a few more questions of your own. Making money matters simple again is the very essence of what we do at Wealthstack, so be sure to get in touch to chat through your unique challenges.