Leaving South Africa behind to embrace expat life opens a world of investing possibilities and financial management strategies. For South African expats, negotiating the complexities of tax regulations, particularly the Expat Tax introduced in 2020, requires specialist and comprehensive financial planning.
A specialist in guiding South African expats toward their investment objectives, Christopher Bowler, a Senior Financial Adviser at Skybound Wealth, looks at how you can optimise your international status today and the strategies to consider when saving and investing for the mid-to-long-term.
Understanding The South African Expat Tax
Whether you've been abroad for years or only recently embarked on your expat journey, your new status brings both opportunities and obligations. Crucially, you must grasp your tax responsibilities as a South African living overseas.
Since the introduction of the South African Expat Tax in 2020, even if they've severed physical ties with South Africa, expats are still subjected to taxation back home.
This tax system categorises individuals into three groups:
Tax Resident: You meet the criteria for physical presence or being ordinarily resident and as such must pay income tax on both local and global earnings.
Tax Non-Resident: You no longer fulfil the requirements for tax residency and are only liable for income tax on earnings sourced within South Africa.
Tax Resident Temporarily Abroad: You are temporarily living and working overseas, without plans for permanent relocation.
Tax residency rules vary worldwide, in some cases potentially exposing expats to taxation in both their host country and South Africa. Seeking advice from international tax experts can help optimise tax positions, minimise liabilities, and ensure compliance with regulations. Exploring tax treaties and formal tax emigration from South Africa can further mitigate double taxation.
Maximising Opportunities For South African Expats
While the Expat Tax remains a constant, South African expats can leverage other avenues to enhance their financial outlook:
Mitigating Currency Fluctuations
Managing finances in foreign currencies poses a significant challenge. To hedge against currency risk, diversify investments across hard currencies like USD, EUR, and GBP. Currency hedging instruments offer stability amidst exchange rate fluctuations, safeguarding purchasing power and savings.
Exploring Global Investment Opportunities
South African expats aren’t alone in relying on investment opportunities back home to try and achieve their financial goals. If the names Allan Gray, Sanlam, and Investec are familiar to you, there’s a strong chance this is the path you have taken. A very large proportion of South African wealth is stored, invested, and saved in just a handful of South African-based firms, primarily in ZAR and SA-based equity. Naturally this leads to an increase in risk, diversification, and liquidity. It also can lead to a lack of competition, driving the cost of local investments upwards.
Breaking away from South Africa unlocks a world of investment possibilities beyond traditional local firms. Partnering with a financial planner with a wide geographical presence, regulatory permissions, and a whole of market proposition is one way of ensuring a secure path to financial success.
Ensuring Wealth Protection
Insurance plays a crucial role in financial planning by shielding expats from unforeseen events. Regularly reviewing health, life, and disability insurance policies ensures adequate coverage in your new home country. Your international status often invalidates existing policies, necessitating tailored coverage to mitigate financial risks.
Retirement Planning
With the Expat Tax in place, effective retirement planning has gained an added significance. Beyond saving for retirement, consider where you'll draw your retirement income, especially if it's not from South Africa. Align investments with your retirement goals, factoring in expected expenses and income sources.
Book A Call With Christopher Bowler Today
While there’s no denying the Expat Tax underscores the need for careful financial management, by understanding how you can benefit from diverse investment opportunities, protecting your wealth, and planning long-term, you can ensure you maximise your expat status and secure your families future for generations to come.
Book A Call With Christopher Today
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About Christopher Bowler
Christopher Bowler is an experienced and focused global financial adviser working at Skybound Wealth Management in London, having previously worked in our Geneva, Switzerland office. He has developed an extensive range of clients from all over the globe, namely Latin America and Southern Africa. He advises on all aspects of financial planning with a specialist focus on repatriation.
Often praised for his attention to detail and ability to listen; his drive for understanding his clients needs and future goals is one of Chris’ greatest strengths. Coupled with his extensive knowledge of financial investments and international cross border solutions Chris is a highly skilled, well-versed and experienced adviser.
