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Author Topic: TAX IMPLICATIONS WITH OFFSHORE ACCOUNT  (Read 8735 times)

jonb

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TAX IMPLICATIONS WITH OFFSHORE ACCOUNT
« on: August 29, 2016, 05:27:38 pm »
I have been living in The Netherlands for the past 4 years and whilst here set up an account with a local bank and built a share portfolio on a Netherlands bank platform accesing US stocks + ETFs

I hold dual citizenship ( UK and SA )  and currently am on a tax ruling in The Netherlands which exempts me from paying tax on gain and dividend earned

The kicker  ;D

I am planning to move back to South Africa ( apart from the general consensus, I am pretty positive on the future on SA and despite what anyone says, there is no place like Home! )

I really enjoy this platform and would like to continue transacting through it when back in SA

My question is what tax implications exist with this setup? Both in The Netherlands and back home in SA

Considering the UK Passport ... does anyone have any idea on this topic  :wtf:

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jaDEB

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Re: TAX IMPLICATIONS WITH OFFSHORE ACCOUNT
« Reply #1 on: August 29, 2016, 05:50:15 pm »
Nope no Idea, but glad to read some positive news that an expat is returning home...  ;D
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Orca

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Re: TAX IMPLICATIONS WITH OFFSHORE ACCOUNT
« Reply #2 on: August 29, 2016, 06:25:20 pm »
If your investments are physically in the US then you will pay withholding tax on dividends to the IRS in the US at a rate fixed by the tax treaty. Patrick can explain more on this.
When you leave, you will have no assets in the Netherlands so will have no obligations to the IRS there. The major hurdle would be the transfer of your portfolio to a SA broker.

What intrigues me is how you got exemption from CGT in the Netherlands.
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Mr_Dividend

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Re: TAX IMPLICATIONS WITH OFFSHORE ACCOUNT
« Reply #3 on: August 29, 2016, 08:34:26 pm »
When you fill in your SA tax you just need to declare holding at cost and any dividends/taxes paid - looks pretty straight forward.
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jonb

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Re: TAX IMPLICATIONS WITH OFFSHORE ACCOUNT
« Reply #4 on: August 30, 2016, 02:44:53 pm »
so you would need to declare this in an SA tax return ?  this is what I was a little unsure of ,

I guess my long term worry is the SA CGT when selling anything, would that be applicable ?

@Orca, yes I pay a withholding tax on dividend. Is there any reason to transfer the portfolio to a SA broker? why not just continue with Euro bank ?
In Netherlands if you are brought in by a company which was nike in my case and they pay you over a certain amount you get a 30% tax ruling which is a less heavy tax rate with substantial benefits, one of these being all held investments are tax free, very sad to leave that!

@JaDeb ,excited too ... so funny though when you tell other people that like WHY WOULD YOU DO THAT???  cannot wait to touch home soil and see a couple smiles. and give me a proper summer damit!
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Orca

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Re: TAX IMPLICATIONS WITH OFFSHORE ACCOUNT
« Reply #5 on: August 30, 2016, 03:27:32 pm »
Yes, you will have to pay CGT after 3 years on sales of stocks to SARS. Any gains made on sales before the 3 year period will be taxed as income. You also have to declare all your world wide assets to SARS every year.
No need to transfer your account to SA. I live in Portugal but have my broker account in SA.
« Last Edit: August 30, 2016, 03:29:25 pm by Orca »
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jonb

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Re: TAX IMPLICATIONS WITH OFFSHORE ACCOUNT
« Reply #6 on: August 30, 2016, 05:17:42 pm »
Hi Orca

You are a wealth of knowledge in this area !
 A few questions if you don't mind

So any sales of stocks must pay CGT in SA within three years

What do you mean gains before that?

If you are in Portugal , do you pay CGT pm investments ?

Is there a benefit to having an SA broker ?  I am just trying to find the best way to position my portfolio on returning to SA

Is it worth talking to an FA ? Most I have spoken to have no idea of offshore inveatmenta and ones here no idea on SA !

Appreciate any further feedback !
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Orca

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Re: TAX IMPLICATIONS WITH OFFSHORE ACCOUNT
« Reply #7 on: August 30, 2016, 06:16:38 pm »
Not quite. The minimum holding period for Capital Gains Tax in SA is 3 years. This may not be applicable to Collective Investments such as Unit Trusts and ETF's but I cannot get 100% clarity on this so I would hold on to them for the 3 year duration. The effective CGT is ~ 11%.

If you sell before the 3 year period, Section 9C of the ITA will not apply and you will pay Income Tax on your gains. ie. Your gains will be added to your other normal income and taxed at your tax rate. The effective rate is ~ 40% if you are a high earner. The R30k exclusion amount (this may have changed since I last looked) that can be deducted from CGT will not apply in this case as you are trading and not investing for the min 3 year period.

You will normally pay tax on your world wide earnings in the country where you are resident. The US laws differ somewhat and maybe Patrick can help there as he has US stocks.
You will still pay withholding tax on dividends in the US but at a rate not exceeding the Double Tax Agreement rate.

There is no need to find an accountant that does cross border taxation as it is so simple to do so yourself.
Read through the Tax thread as it is discussed in detail there.
Just leave your account in Nederland.


« Last Edit: August 30, 2016, 06:18:46 pm by Orca »
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Orca

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Re: TAX IMPLICATIONS WITH OFFSHORE ACCOUNT
« Reply #8 on: August 30, 2016, 06:37:00 pm »
A quick glance of the DTA shows that you will not pay more than 15% dividend tax in the US and Capital Gains Tax must be paid where the seller is resident.

You may need to consult your broker about this as dividend tax is on a sliding scale up to ~ 39% and all interest related dividends and foreign related dividends will be tax exempt as a non resident alien.
They may send you a form to sign.
« Last Edit: August 30, 2016, 07:08:04 pm by Orca »
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jonb

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Re: TAX IMPLICATIONS WITH OFFSHORE ACCOUNT
« Reply #9 on: August 31, 2016, 02:25:20 pm »
OK thanks , thats a massive help!

So definitely keep the investment going at least there years and thereafter i anything sold you will only be liable for CGT ( 11% ? )

Thats easy as I dont really envision using the money for anything as this is a Long term holding

With dividends you 100% correct , I remember having to sign something saying i wasn't a US resident so hopefully on the lower dividend tax rate!

I dont have a broker at all and doing it all DIY, only have a invest platform from a local bank here so will connect with them and see if i can get tax except in some way

You been a great help! thanks!

YOu still enjoying portugal ? I would definitely move out there as love it and spend a bit of time there whenever I need the sun however I am still working and without the language its not easy !
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