Author Topic: Investment Strategies for Nomads  (Read 3458 times)

andre

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Re: Investment Strategies for Nomads
« Reply #30 on: October 19, 2017, 02:36:25 pm »
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"




Orca

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Re: Investment Strategies for Nomads
« Reply #31 on: October 19, 2017, 05:05:18 pm »
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. 
I started here with nothing and still have most of it left.

andre

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Re: Investment Strategies for Nomads
« Reply #32 on: October 19, 2017, 05:16:43 pm »
Attached is the latest guide as from SARS website.
From what I can tell the definition is still the same.

Quote
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:





« Last Edit: October 19, 2017, 05:21:06 pm by andre »

andre

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Re: Investment Strategies for Nomads
« Reply #33 on: October 19, 2017, 05:25:12 pm »
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.

andre

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Re: Investment Strategies for Nomads
« Reply #34 on: June 21, 2018, 10:34:18 pm »
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

Patrick

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Re: Investment Strategies for Nomads
« Reply #35 on: June 24, 2018, 06:49:15 pm »
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

andre

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Re: Investment Strategies for Nomads
« Reply #36 on: June 24, 2018, 10:45:26 pm »
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.

Bevan

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Re: Investment Strategies for Nomads
« Reply #37 on: June 26, 2018, 03:20:25 pm »
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.

andre

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Re: Investment Strategies for Nomads
« Reply #38 on: June 27, 2018, 12:50:15 pm »
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


andre

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Re: Investment Strategies for Nomads
« Reply #39 on: June 27, 2018, 01:12:28 pm »
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..

Nivek

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Re: Investment Strategies for Nomads
« Reply #40 on: June 27, 2018, 05:27:00 pm »
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...

andre

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Re: Investment Strategies for Nomads
« Reply #41 on: June 27, 2018, 06:50:40 pm »
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



Bevan

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Re: Investment Strategies for Nomads
« Reply #42 on: June 28, 2018, 01:25:45 am »
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....

jonb

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Re: Investment Strategies for Nomads
« Reply #43 on: July 04, 2018, 10:43:41 pm »
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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andre

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Re: Investment Strategies for Nomads
« Reply #44 on: July 10, 2018, 03:12:59 pm »
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: