With more than 4500 high-net worth individuals (HNIs) leaving South Africa in the last decade alone, acquiring a second residency or citizenship has become increasingly attractive.
These residencies offer a range of lifestyle, business, investment and tax benefits – and contrary to popular belief, you don’t always need to put down massive amounts of money to live and work abroad, as the continually changing residency and citizenship landscape means there’s something for everyone.
Apart from providing a secure second option, moving abroad offers a range of benefits, including the ability to travel internationally without visa restrictions; providing better education and career prospects; offering a comfortable, convenient and tax efficient location to retire; greater tax efficiency; wealth management; and estate planning.
One of the routes to a life abroad lies in residency programmes. And while there are a range of options available, two of the most popular options are Financially Independent or Passive Income Programmes and Tax Residency programmes, says Dani van Vuuren, a business consultant at Sovereign Trust.
Financially Independent or Passive Income Programmes
These programmes offer residence permits to applicants who can demonstrate a certain level of passive income or personal wealth. They often – but not always – require you to make the chosen country your primary place of residence and tax residence. For South Africans, popular destinations under this type of programme include Portugal, Cyprus, Mauritius and the United Arab Emirates (UAE). Similar programmes are also offered by countries like Greece, Spain, Thailand, and various Caribbean nations.
Tax Residency programmes
These programmes offer preferential tax rates for non-domiciled individuals who establish tax residency in another country with a more favourable tax regime, subject to the local jurisdiction’s requirements. Most countries apply a minimum physical presence test when determining tax residency, and it is important for South Africans to understand their position as SA tax residents and the consequences of retaining or ceasing their SA tax residency.
“Many people believe that by not being physically present in South Africa, their tax obligation to SA is no longer applicable. This is not the case at all. When considering foreign residency or tax residency, you must understand your ongoing obligations to SARS,” said Van Vuuren.
Tax Residency programmes are largely divided between contribution-based regimes, like Gibraltar and Malta, and minimum stay-based regimes like Cyprus, Portugal and the UK. Other options include Greece, Italy, Thailand, Antigua & Barbuda, the Bahamas and the Cayman Islands.
Whatever route you end up taking, though, it’s critical to get expert advice before making any move to ensure you remain tax-compliant and to navigate the nuances of each programme and country.
“There are so many points to consider before making a decision on where to emigrate,” says Van Vuuren. “These include succession and estate planning; personal, commercial and health insurance; and investment and retirement planning. A second residency may influence how your wealth and estate is handled and taxed at death, how a country taxes your pension, the inheritance laws applicable to that country, as well as the need (or lack thereof) for change of insurance.
“It’s not a one-size-fits-all approach: every individual’s choices will differ, based on their needs and circumstances. That’s why it’s always advisable to seek professional assistance and start planning well in advance before you head abroad.”