The JSE and finance forum for South Africa
General Category => Shares => Topic started by: andre on September 22, 2017, 01:22:38 pm
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Hi guys - been lurking here for a while and I figured I'd start a thread to (hopefully) tap into the collective wisdom of this forum :P
I’m turning 45 in a few months and have long since come to the realization that we MUST make the best use of our opportunities as our lives is but a blink of the eye. Thus, by the end of next year, the wife and I plan to pack life in as we know it and start traveling full-time – while we’re (mostly) still of sound body and mind. ;D
I know what you’re thinking. What crazy hippy crap is this?!!
I’ll add more later..
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Lucky bastids...
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Ditto :mad:
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Lucky bastids...
:D ;D
Everything comes at a price or sacrifice. But please - the purpose of this thread is not to be smug. I genuinely would appreciate feedback, comments and advice on my plans.. :(
Don’t get the wrong idea. I’m pretty much Mr. Joe Middleclass who has always worked for a salary. No silver spoon sadly. Due to making umm.. 'lifestyle choices' we were able to save and diligently dabble in buy-to-let property over the last 20 years. (Hint: we're DINKs). ;)
Although our property has done great - as well as provided for a reasonable rental yield we need to diversify going forward - possibly even reconsider some of the capital currently 'stuck' in property as I'm not convinced it's the best choice long term...
It gets a bit more complicated from here - the truth is that there's almost no chance of us ever returning to SA full time. Perhaps we'll come back for a short-term work contract or maybe a holiday - SA is still EXTREMELY cheap! Furthermore, this is still our base of tax residence and will be for the foreseeable future.
I should mention that although we are SA born we both also hold Italian citizenship. :-X
more to come..
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Good man, also going to be doing the same thing.
On the financial side - would look at other countries tax systems. For me, the UK system has a lot of advantages. Will you be keeping the properties or converting into shares/REITs? Would be looking at fixing some of that income (if staying in SA) into euro's/dollars through oversea's reits.
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Good man, also going to be doing the same thing.
On the financial side - would look at other countries tax systems. For me, the UK system has a lot of advantages. Will you be keeping the properties or converting into shares/REITs? Would be looking at fixing some of that income (if staying in SA) into euro's/dollars through oversea's reits.
And THIS is why I'm starting this conversation. :TU: Tax is my biggest issue
Theoretically (according to the 4% rule anyway ::) ) IF we structure our finances properly we should be able to travel indefinitely on our modest (but reasonable) budget. When we pack it in we plan to liquidate everything we have – down to what fits into a 45L backpack – that is except for our properties and whatever we have in existing pension structures (RA’s, pension funds, TFSA). I've already bitten the bullet and converted old insurance type products to low-cost products to get out of recurring payments.
I'm thinking that when we travel we should keep contributing to TFSAs.. THoughts on that?
As we will have a relatively low taxable income as we split everything between us there would be little benefit to add to other retirement structures.
As it stands now our primary source of income would be rental but that’s not going to cut it in the long term. Over the next 12 months, while we both earn, I plan on moving our available discretionary funds to Europe and invest directly into a cost-effective ETF's (more on this later). By the way - as a traveler, the N26 black account seems like great value. For now, I'm sticking to the free account and can fund a DeGiro custody account from there (shout out to Patrick for his diligence ;D )
I'm definitely considering putting our primary residence on the market middle next year. Although this will make a dent in potential rental income it might be the way to go...
The question is what to do with it effectively replace the lost income...
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This is really going to be interesting tax wise. You will have to do stacks of juggling here trying to keep your tax residency in SA. Gets very complicated in this case.
In the first place EU countries.
You’re automatically resident if either:
1.You spent 183 or more days in the country in the tax year
2.Your only home was in that country - you must have owned, rented or lived in it for at least 91 days in total - and you spent at least 30 days there in the tax year.
So you would have to relocate to a different country every 90 days to escape being tax resident.
If you happen to get this right then you have a further problem. SA will regard you as non resident after 183 days absence and all your properties will be regarded as a "deemed" sold at the valuation on the day you left and CGT will be payable.
Good news is that you have 5 years to pay it in yearly increments. With interest though.
More later. Beer time.
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This is really going to be interesting tax wise. You will have to do stacks of juggling here trying to keep your tax residency in SA. Gets very complicated in this case.
In the first place EU countries.
You’re automatically resident if either:
1.You spent 183 or more days in the country in the tax year
2.Your only home was in that country - you must have owned, rented or lived in it for at least 91 days in total - and you spent at least 30 days there in the tax year.
So you would have to relocate to a different country every 90 days to escape being tax resident.
If you happen to get this right then you have a further problem. SA will regard you as non resident after 183 days absence and all your properties will be regarded as a "deemed" sold at the valuation on the day you left and CGT will be payable.
Good news is that you have 5 years to pay it in yearly increments. With interest though.
More later. Beer time.
Interesting info!
On the first part - we wont be spending much time in the EU first 4 years at least. Europe is last on my list and even then ..
Eventually it will happen though.
A will regard you as non resident after 183 days absence and all your properties will be regarded as a "deemed" sold at the valuation on the day you left and CGT will be payable.
Wasnt aware of this though?
I have a number of friends working offshore and they maximise their time out of country often for tax purposes. How would this affect them?
Either way perhaps this is good reason to get rid of property..
In the Cape it's wine time 8)
Enjoy the long weekend!
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Nope. I'm in Portugal. We have great wine here too.
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... long since come to the realization that we MUST make the best use of our opportunities as our lives is but a blink of the eye.
I like your thinking, good luck. :TU:
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Here is why you should duck.
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Or did you money go to this place? Sorry Andre, couldn't resists and please carry on with your blog.
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I’m turning 45 in a few months and have long since come to the realization that we MUST make the best use of our opportunities as our lives is but a blink of the eye. Thus, by the end of next year, the wife and I plan to pack life in as we know it and start traveling full-time – while we’re (mostly) still of sound body and mind. ;D
I know what you’re thinking. What crazy hippy crap is this?!!
I’ll add more later..
Actually I'm thinking me too! This is exactly what I plan to be doing in a few years time. I'm sitting typing this in Lisbon, where my wife and I have spent the last few days walking and cycling all around the city. Wonderfully, the biggest worry we've had is that we don't slip on the polished mosaic pavement. A pleasant change from whether we'll be mugged in the 300m between the gym and our apartment, or if the lights will stay on for all of next month (9 days without power in the last 30).
There's a lot to see in this world, and I hope to explore as much as possible before I need plastic hips and blood pressure medicine!
Though I must mention one interesting thing we noticed in the local travel agencies. They have cheap offers for pretty much all of Europe and the west, but their most exotic and expensive trip is a combo trip to Kruger park and Mozambique! Everyone we speak to is in awe that we've been to those places. The pot of gold always seems to be at the opposite end of the rainbow.
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A The pot of gold always seems to be at the opposite end of the rainbow.
So true. We had a quick vacay in Moz last month for my bday and as soon as you leave the resort/coast line you’re just thinking – "Let’s get out of here" – same with Lesotho and Madagascar. Most of the holidays abroad I’ve kind of expected more than what it delivered, Eiffel Tower was impressive but I hated the graffiti and spitting in the streets, Portugal was okay-ish & Spain (loved the jamon) was fun, Stonehenge was uhhmm dare I say it - small - but I loved Sherwood Forrest. Switzerland (Jungfrau-region), Italian Alps (Treviso), Germany/Belgium, Mauritius were beautiful and delivered more than expected. Amsterdam was a total disaster, you can just say so many times, “no – I’m not interested in what you’re selling” – but still interesting to see what people consider as fetishes and fun. Egypt was interesting, might have had a little something to do with the fact that our guide sneaked us right below into one of the pyramids into a restricted burial chamber. I must admit I was thinking "they are going to bury us there and no one will ever know" – also thought "so be it – what a nice place to rest and future archaeologist will have a field day trying to figure out what our bones are doing there and how we fit into the royal picture." Riding camels were also fun. Best of all for me was Scotland, what a stunning place. I can go on forever, traveling basically my number one interest. I’ll stop now. The point being, you cannot put a price on an experience. It’s all good in the end, just go and explore!
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I love the topic...
excerpt from a book ' the gypsy in me'
Solo travel has a peculiar power for those of us who are suited to it. Along with the discovery of one's own true nature and the opportunities to express it comes a corresponding freedom to think thoughts that may be considered odd, threatening, even reprehensible and lunatic, by ones familiar acquaintances. It is perfectly natural that prophets should come out the wilderness bearing revelations, but all prophets are not created equal. Some are giants, some are mediocre, some are of piddling stature, and some are nuts. The difficulty is that neither they nor those that receive there proclamations can really tell untill much later.
Mine is not pure asceticism of a single-handed yachtsman or a Saint-Exupery.There is no lack of people in my journeys, and they are my principal interest. Nor am I a dispassionate voyeur peering into other peoples lives. Strong connections are formed rapidly, and they nourish me. What distinguishes them from my relationships with friends and family at home is the absence of those expectations which I find burdensome and restrictive, demanding that I behave in certain predictable ways. These emotionable transactions trade too heavily on guilt and obligation for my taste. When I travel alone, I experience a sense of freedom that occasionally comes close to ecstasy.
The physical freedom is an important element - the ability to stay or go as one pleases, to follow whatever the inner voice suggests, is a rare luxury in most lives, and there must be many who have never allowed themselves to experience that inner-directedness -- the compass in the heart. More valuable to me even than that is the freedom to be whoever and whatever you feel yourself to be rather than having to conform to the patterns that others are accustomed to expect. "
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Here another one for a bit of diversion from a fellow biker from Cape Town (Kamaya)
What else would one do?...
Driving from Jhb. Not sure where to stop to sleep. The GPS - that seductive electronic siren suggested Hopetown would be doable before sundown at the current pace. Hopetown? Hopetown! Now there's a fine place to stay considering all that is going on...
It also suggested a bouquet of guest houses. The Lavender guest house piqued my attention. My logic was that, I am in so deep behind the boerewors curtain that this isn't curtains we're talking about, this is shutters baby, and how does lavender make its way past the plethora of vans, kloofs, tjies and plaase?
A desperately gorgeous sunset of complex purples and pinks was putting itself to bed with me a mere 10k's to go and it looked like if I can locate the local bottle store I might have been able to gate crash natures revelry. Maybe even get a gorgeous picture to feel happy and hopeful to.
Bonus! Hopetown is small enough with an obvious need that the only bottle store is open till 7!
"Do you have an un-oaked Chardonnay?" Says I, keen to have some first world alacrity to make up for my arriving late for the show.
I have often been labelled an optimist. In asking for Chardonnay, un-oaked in Hopetown I might very well have set a new personal best in this discipline!
Asking in English, I'm obviously a "souty", and as such is not a well-known entity round here so I was treated a bit royal. With all the dignity that such a request seems to have required, the owner with creased brows and fat fingers walked around from the till and personally inspected the 3 bottles of white in amongst the motley bunch or reds that looked even sorrier for having robbed precious space from the rows of 6 deep brandies and other powerful spirits.
"No, meneer, I wus sure we had one soon. Must I order?"
You've gotta love small towns. Ernest politeness and smashed language.
I'll make do with the Orange River Cellars, (I'm being a snob, they do a fabulous red and not a bad white. Just not un-oaked)
Before me in the queue was an old white chap. Clearly had seen better days and much easier work. He was still a working man, dirtily obvious that, not because he wanted to, but, he had two demons to serve; poverty and alcohol.
He was the not so shining example of what happens when one isn't fortunate enough to have had a seat belt and air bags in the monstrous traffic smash between the colonial experiment and the new South Africa.
At first I was not sure what he was paying for, then I saw it, the poor man’s poorest drink; a 5 litre box wine with not one label on it. It was just a white box of hope whose fine print, by its omission, promised loss, past and misery.
Sadly, with all this, I missed my sunset by at least a half glass of wine.
Lavender and hope. It was serendipitous and mirrored exactly where I was. Exactly.
A promise of wisdom and soothing and possibility bathed in beauty, but, delivering missed opportunities, pathos and sorrow.
I am so sorry and sad... But tonight I sleep in lavender. Maybe tomorrow truer purple and pink?
Compromise!
The truth is that for most, the nomadic journeys must occur in the mind or value must be accorded to random nocturnal sojourns around the suburb or the occasional walk through a park where as one watches one's dog piss against a carefully maintained shrub for which we pay the necessary levy taxes. The complex strands of any family dynamic do not always allow for the freeist of spirits to take off on whims of self discovery. I have been into a few wildernesses without exiting my front door.
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back on topic
....possibly even reconsider some of the capital currently 'stuck' in property as I'm not convinced it's the best choice long term...
Andre, i also have the same idea to slowly get out of property,
One of the first barriers is CGT. (As Patrick said... its a tax on inflation :mad:)
Maybe take the time to move into each one ..live a bit and then sell as a primary??
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:D Funny
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In theory, as long as you don't establish tax ties in any country, you only need to escape the taxes of your home country. In South Africa that means don't spend more than 183 days inside SA and you won't pay tax unless you earn over R1 million.
This is quite easy for a nomad, just spend less than the qualifying number of days for each country, and check the other fine print too of course, ie some countries will tax you simply for owning property there or even having a rental agreement.
But what if you decide you want to settle in one place for longer than 6 months? Happily this is possible too. All you need to do is live in a country that doesn't tax foreign income. As someone living off investments not earned in that country, you are clearly only earning foreign income.
In Europe your options aren't great, Monaco and the Vatican! Portugal will give you a 10 year holiday on most foreign income, but that lasts just 10 years. It looks like to can get it back though after a 5 year break, so you just need to find somewhere to live for those 5 years. How about Andorra which sits between Spain and France and have 24000 Euros exempt from tax, that would do nicely for me.
Around the world though you have plenty of countries which don't tax foreign income, many of which are beautiful islands where I would love to spend some time. Here's the full list:
Angola
Anguilla
Antigua and Barbuda
Bahamas
Bahrain
Belize
Bermuda
Bhutan
Bolivia
Botswana
British Virgin Islands
Brunei
Cayman Islands
Costa Rica
Democratic Republic of the Congo
Djibouti
Georgia
Guatemala
Guinea-Bissau
Hong Kong
Kuwait
Lebanon
Macau
Malawi
Malaysia
Maldives
Marshall Islands
Micronesia
Monaco
Namibia
Nauru
Nicaragua
Oman
Palau
Palestinian Authority
Panama
Paraguay
Pitcairn Islands
Qatar
Saint Barthelemy
Saint Helena, Ascension and Tristan da Cunha
Saint Kitts and Nevis
Seychelles
Singapore
Somalia
Somaliland
Syria
Tokelau
Turks and Caicos Islands
Tuvalu
United Arab Emirates
Vanuatu
Vatican City
Wallis and Futuna
Western Sahara
Zambia
Source: https://en.wikipedia.org/wiki/International_taxation
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Here another one for a bit of diversion from a fellow biker from Cape Town (Kamaya)
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The truth is that for most, the nomadic journeys must occur in the mind or value must be accorded to random nocturnal sojourns around the suburb or the occasional walk through a park where as one watches one's dog piss against a carefully maintained shrub for which we pay the necessary levy taxes. The complex strands of any family dynamic do not always allow for the freeist of spirits to take off on whims of self discovery. I have been into a few wildernesses without exiting my front door.
Kamanya as in Andrew Johnstone?
I've actually done the odd bit of riding with him back in the day. Mostly in places completely unsuitable for choice of bike - but fun none the less :)
He's quite the gentleman - the thinking mans biker so to speak.
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In theory, as long as you don't establish tax ties in any country, you only need to escape the taxes of your home country. In South Africa that means don't spend more than 183 days inside SA and you won't pay tax unless you earn over R1 million.
...
Source: https://en.wikipedia.org/wiki/International_taxation
That list doesn't look too bad from my perspective :) Thanks for posting!
Our short-term strategy is not to be based ANYWHERE specific for any length of time. That's until the wanderlust runs out or we need a break. Even then we might just stick around an interesting spot for a couple of months to recharge the batteries and/or curb the spending ;D
I'll give you guys a quick rundown of our situation:
We currently have 4x PROPERTIES - valued just over R9 mil in total. As it stands right now and we rent them ALL out it should provide an income (after expenses but before tax) of around R450k pa. Expenses accounted for include rates & municipal services, levies, insurance, maintenance as well as management fees. We’re not foreseeing any other local income so if we split this income our individual tax liability is around R29k per person per year (2017-18 tax tables)
Current (restricted access) RETIREMENT FUNDS total to around R2 mil and is made up of RA’s, Provident Funds and TFSAs. This will not provide any income in the short term and I have at least 10 years to go before I can get access to a third of it so, for now, I'm leaving it out of all calcs. I’m thinking to keep adding to our TFSA’s but I’m not sure whether it’s a good idea as there’s no tax benefit but at least one has access to it and can buy a low-cost ETF. >:( The alternative would be to take the 2x33k and add to our RAs and cut personal tax by 2 x R9k per annum…... This might be a more sensible approach?
We’ll still have some local expenses such as Medical & Travel insurance, Disability and Dread disease cover of around R60k per year.
Other LOCAL INVESTMENT (currently) of around R500k include some ETF’s. There’s no immediate income derived from these but it's all equity-based.
We’ve got some CASH saved up and have started moving funds offshore - over the next 12 months to hopefully grow our international portfolio to around R1 mil - all invested in Euro-based ETF’s. My thinking though is to sell our primary property next year - which should free over R3 mil and move that offshore as well to add to the pot This would decrease our local rental income by around R160k and more than halve our tax liability (then only R13k per person p.a.). Obviously, we split all investments between us to reduce tax liability.
According to my cals if we then have this 2 x R2mil OFFSHORE invested in low-cost products with a predicted capital growth of 10% p.a and a 2% dividend yield we can draw a combined R240k p.a. Accounting for 7% inflation, 5% fiscal drag correction and of course a 7% annual increase in drawings, the capital would be DEPLETED in around 50 years. Dividend Withholdings Tax is calculated at 20% but in theory, we might be able to pay less if our tax base remains in SA. This income in addition to the remaining rental totals to around R500k p.a. (after tax) which is more that we need at the moment.
The remaining properties are all in sought after areas of CT and should keep up with inflation at the very least and the rental income is a nice constant but far from the best income generator in my opinion. From my perspective, the capital is a dead loss to me when I’m dead so one should structure it to eventually deplete. However, I’m a bit hesitant to put all eggs into the equity basket.
Determining a long-term travel budget is difficult as one tends to spend less if you stop moving. To start with we’ll keep moving and adjust according to budget and energy. For now, I’m working on around $30k p.a. which should be more than adequate for the way we travel. We don’t need to draw from our investments for the first year or so as we should have at least R500k cash available after flogging our cars and household content.
That’s the theory anyway. ;)
Help me out if I'm missing something major
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Oh yes, forgot to add I have a little bit riding on some cryptos.
If Bitcoin goes beserk in 10 years from now perhaps all the above doesn't matter 8) ;D
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Wow, what a great position to be in at your age, well done sir!
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Wow, what a great position to be in at your age, well done sir!
thanks but as said everything comes at a price or sacrifice. A bit of focus early on in life makes it oh so worth it now.
>:( We really should be putting more effort into educating youngsters as to the power of compound interest. And what sacrifice is? Instant gratification is an illness of our time...
When my friends discuss the latest model XYZ car/bakkie/bike and think I'm nuts for driving a 20-year-old rust bucket I have to remind myself who will have the last laugh.
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EU CGT
Belgium 0%
Croatia 12%
Isle of Man 0%
Poland 19%
Spain 23%
UK £11,100 annual exemption then sliding scale
Portugal 28%
SA will not tax Capital Gains as it is residency based according to the DTA.
Stocks held in SA will be capped at 15% by the DTA for DWT.
Source: Me
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Thank you Andre for sharing and well done on the discipline to save as you have.
Have you been travelling the last number of years? i ask as full time travelling can have drawbacks. (missing family and friends etc)
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Thank you Andre for sharing and well done on the discipline to save as you have.
Have you been travelling the last number of years? i ask as full time travelling can have drawbacks. (missing family and friends etc)
Valid question. I guess we're just not that family oriented and the idea of not being around family doesn't bother us. We don't really have much family, to be honest, and once you reach a certain age and don't have kids true friends seem to be few and far between. My wife and I have traveled together yearly pretty much since we've met. Over the last 10 years, we've attempted to do a proper 4-week trip every year. We've had some longer trips as well on the odd occasion (8 weeks in the States, 10 weeks in Japan) but for the most of it around a month at a time. It does take a certain type of person to do this kind of traveling and dont think for a moment long-term travel is always a bed of roses. Travelling can be surprisingly tough at times.
I remember, up until a few years ago, we would get to a certain point towards the end of an active trip where you would feel - it's time - you're 'ready' to go home.
I haven't had that feeling in quite a while ..
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For those interested - here's a spreadsheet I've built and shared recently with the Fat Wallet guys that show the difference between investing in Rands vs investing in US Dollar due to the effect of inflation and CGT. Of course, you have to take into account the cost of getting funds offshore as well as back to ZAR which may affect the potential benefit. In my case, I don't plan on converting back to ZAR. (You can download it from attachments below and play with it - please point out my mistakes :) )
(https://s1.postimg.org/3gppj0u5wf/Capture.jpg) (https://postimages.org/)
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Nice, confirms what my calculations have shown too. I also expect CGT to rise in future as SA continues to run out of money magnifying the difference.
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I shudder to think what #andre will pay in Exit Tax. Only his primary home will escape some CGT. :o
I'm still struggling with mine and have a cross border tax consultant working on it and will post the outcome.
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I shudder to think what #andre will pay in Exit Tax. Only his primary home will escape some CGT. :o
I'm still struggling with mine and have a cross border tax consultant working on it and will post the outcome.
For now it would be best for us to remain tax residents in SA and as we're not emigrating, in theory, we should still pass the test as "ordinarily residents" as SA is still our permanent abode no matter how long we're away for - as long as we still have financial ties in SA by owning property.
"Under South African law a resident is defined by the Income Tax Act, 1962, as either an individual who
meets the physical presence test OR an individual who is ordinarily resident in South Africa under South
African common law.
Ordinarily resident: A person will be considered to be ordinarily resident in South Africa, if South Africa
is the country to which that person will naturally and as a matter of course return to after his or her
wanderings. It could be described as that person’s usual or principal residence, or his or her real home"
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That old law has been amended about 4 years ago but I have not yet read it.
If in any year you are not present for at least 91 days you will be regarded as non resident and all your assets will be regarded as sold on the day before you last left SA.
However, your primary residence will not be deemed as sold. Only when you actually sell it will CGT be apply.
SA has sole rights to CGT on all real estate but not movable property such as securities when you are non resident.
Don't take me advice as it gets complicated but get professional advice before you become a nomad.
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Attached is the latest guide as from SARS website.
From what I can tell the definition is still the same.
2. RESIDENT
In principle, the first step in determining the normal tax liability of any natural person in South Africa is to establish whether or not that natural person is a “resident” as defined in section 1.
Two separate tests are applicable to determine whether or not a natural person is a resident, namely –
• the ordinarily resident test; and
• the physical presence test.
2.1 Ordinarily resident test
This concept means that a natural person is a resident if his or her permanent home, to which he or she will normally return, is in South Africa. A continuous physical presence is not a prerequisite to be ordinarily resident in South Africa.
The courts have held, in ascribing a meaning to the concept “ordinarily resident”, that it refers to, for example –
• living in a place with some degree of continuity, apart from accidental or temporary absence. If it is part of a person’s ordinary regular course of life to live in a particular place with a degree of permanence, he or she must be regarded as ordinarily resident;
• the place where his or her permanent place of abode is, where his or her belongings are stored, which he or she leaves for temporary absences and to which he or she regularly returns after these absences;
• a residence that is settled and certain and not temporary and casual; or
• where a person normally resides, apart from temporary or occasional absences.
A natural person, who becomes ordinarily resident in South Africa, will become a resident as from a specific date. It, therefore, follows that any income that is received by or accrued to that person from a source outside South Africa, before he or she becomes ordinarily resident in South Africa, will not be subject to tax in South Africa unless such person is regarded as a resident by virtue of the physical presence test (see 2.2).
2.2 Physical presence test
This concept is time-based and is only applicable to a natural person who was not at any stage during the relevant tax year ordinarily resident in South Africa. This test is based on the number of days during which a natural person is physically present in South Africa. It is important to note that a day includes a part of a day. Thus both the day of arrival and departure are included in the count. This test is also known as the day test or time rule. A day is regarded to start at 00:00, therefore, a person who arrives in South Africa at 23:55 would be regarded to be present in South Africa for a full day. However, any day that a person is in transit through South Africa between two places outside South Africa and that person does not formally enter South Africa through a port of entry, or at any other place as may be permitted by the Director-General of the Department of Home Affairs or the Minister of Home Affairs, is excluded in the count.
The physical presence test must be performed annually in order to determine whether the natural person concerned is a resident for the tax year under consideration. The test consists of three requirements, that is, the natural person must be physically present in South Africa for a period or periods exceeding – 2
i) 91 days in aggregate during the tax year under consideration;
ii) 91 days in aggregate during each of the five tax years preceding the tax year under consideration; and
iii) 915 days in aggregate during the above five preceding tax years.
A natural person has to meet all three requirements before he or she will be regarded a resident (refer to the attached diagram in Annexure A). A tax year starts on the first day of March of one year and ends on the last day of February of the subsequent year.
In terms of the physical presence test, a natural person who is not ordinarily resident in South Africa only becomes a resident for income tax purposes as from the first day (beginning) of the sixth tax year if he or she is physically present in South Africa for the periods as set out above. The purpose of the presence is irrelevant. A day is therefore counted even if the presence is as a result of a holiday, visiting friends, funeral etc.
A natural person, who is a resident by virtue of the physical presence test, ceases to be a resident if he or she is physically outside South Africa for a continuous period of at least 330 full days. The continuous period begins the day after the day on which he or she physically left South Africa. The natural person ceases to be a resident as from the day immediately after the day on which he or she left South Africa for a continuous period of at least 330 full days.
If you're not determined to be "ordinarily resident" as per 2.1 then the physical precence test applies as follow:
(https://s1.postimg.org/4z6jyhj50v/Capture.jpg) (https://postimg.org/image/8wyxf5u5nv/)
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That being said - I'm not all that adverse to the idea of spending 91 days per year in SA.. 8)
I'm rather fond of the Cape summer and kite surfing is a passionate pastime. SA is still a bloody cheap destination compared to most of the world.
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It's been quite a while since I've posted here or even visited the forum..
We were planning to have a short holiday in Italy this year to attend a family wedding but in the 2nd week of January things changed radically. ;D
Our schedule got pushed forward rapidly and ended with me quitting my job effective end May. My wife ended all projects at the same time and we took off from 1 June - starting our nomadic journey.
The last few months was 'interesting' and although we put a few properties on the market we actually bought one as well - go figure ;D
Hopefully, things will start to settle down and we will figure out how (and if) the puzzle fit . ;D
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That's such cool news, what pushed it forward?
Once things settle down I'm going to have to do a follow up. I have about a million questions I'd like to ask :)
Oh and in case anyone is wondering what a life without needing to work can look like, you can find Andre's youtube videos here: https://www.youtube.com/channel/UCJlKfyK8G8hZwX6PIAO5HuA/videos
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What pushed it forward? I blame Steinhoff :D Partly tongue in cheek but my wife had some involvement in property development with them and that ground to a halt. Well, that's my story and I'm sticking to it. 8)
Many balls in the air at the moment and although we're traveling full time right now we have to finalize some property sales and find a sustainable way to manage the remaining issues. We'll be back in CT in October for a few months to wrap up a few things and at least enjoy a bit of Cape summer before heading off early next year - for what would probably be indefinite.
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Andre, are you figuring on getting a 10% return going forward? I'm not sure that is going to be possible from equities... We are potentially moving into some pretty scary territory now. The US is completely bankrupt and the only ones who typically buy their bonds are either pissed off (Chinese) or not interested (Japanese and the Fed). US social security goes bankrupt in 5 years time. US interest rates are heading north at a rapid clip yet there's no real inflation in sight i.e. the bond market is about to go kaboom! Higher rates mean significantly lower equity markets. The volatility we're seeing now is just the tip of the iceberg.
Of course I don't have a crystal ball but I reckon that property and good old SA will come right in the end. I would hang onto those properties and maybe not put too much into equities right now.... When all those passive investors in tracker funds start getting their quarterly statements and start seeing negative returns, and invest in savings accounts at 3% instead, we will see the mother of all stock market exodus' as tracker funds liquidate.
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Interesting times indeed. That said, if we always wait for the perfect moment we might just wait forever?
For us, this is as much a lifestyle choice as it is a financial choice. We need to make the absolute best of at least the next 10 years - and the time is now. Not later.
But yes. There might be a continuation of sideways market action and I guess an expectation of closer to 7-8% is more realistic right now. Who knows how things will look in 10 years from now. Fortunately (for us) it's not an all or nothing approach and we can evaluate our position every few years and if need be even hit the grindstone again for a while. But that's far from a first choice...
To be honest, right now I'm not too certain on the best course of action ito investments. We have some property liquidating this year and it's a frightening prospect to lose a chunk of the capital right away if we dump it in equity. :o What's the 'safest' route for the next 5 years? Suddenly those RSA retail bonds at 8.5% doesnt look too bad ;D But that would mean accepting the low-risk option and market FOMO.
I'm thinking that it would be best to find a balance somewhere in the middle of Bonds, REIT's and Equity. I'd probably stick to a low-cost offshore world based ETF for Equity and look at Bond and REIT options in ZAR. We'll keep the property we have left for the next 5 years at least.
I'm all ears for any advice though ;D
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One thing that plagues me is my desire to move money offshore. This dampens my enthusiasm for being too invested in ZAR land.
However the moment we move money into another currency it pretty much HAS to go into equity to have any chance of growing..
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Suddenly those RSA retail bonds at 8.5% doesnt look too bad ;D But that would mean accepting the low-risk option and market FOMO.
With the currency swings and you living offshore it might not actually be low risk...
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Suddenly those RSA retail bonds at 8.5% doesnt look too bad ;D But that would mean accepting the low-risk option and market FOMO.
With the currency swings and you living offshore it might not actually be low risk...
Exactly! We spend Euro / USD and just the inflation differential could mean 2% p.a. against ZAR
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I'm bearish ZAR short term but very bullish longer term. Clearly your annuity income is in ZAR but you spend USD etc. Depending on how active you want to be I would go long USD:ZAR via a CFD account most of the time. There's also the ETF option. You could also look at peer to peer lending. Very risky but potential returns quite high. And could satisfy a social investment angle. There's also buying into future royalty streams. And there's even equity crowd funding options out there these days. If you just want vanilla equities then I'm really not the right guy to ask. How about creating your own AirBNB model, where homeowners earn and spend a crypto currency by renting out their house whilst travelling and staying in other houses around the world? That hedges your currency right there....
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What an interesting topic ! Been following but been to tied up to comment! As Patrick said, looking forward to getting stuck in when things calm down . I have just done 10 years in EU an US , now back in Cape Town for awhile .. have equities in both EU an US, can offer my own findings here with looking for safe standard income equity drivers in this space that have worked well in the past 10 years. Really interested in the tax outcomes Andre! I think a few of us are looking to do similar so very interesting to see how it rolls ... will keep posted to this thread
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It will take a year or two for the tax situation to become clear. I was still employed until May so mostly standard tax for this year. For the following year things should be more interesting as until now I've never sold equity or drawn much interest on cash or savings.
The strategy is to take advantage of the upcoming lower tax bracket we'll fall in from this/next year and share the burden between us as best as possible. Relatively speaking we'll each become 'low-income' earners for at least the first few years or so there should be no other tax implications that just rental income, interest and DWT. The challenge will be to leverage the foreign DWT to lower local income tax a bit.
I don't foresee the need to sell off equity for a while but this might change once we've made the complete transition to nomads.
Will keep you guys posted though. :TU: