Building global wealth from South Africa #4: Tax
Welcome back to this series! Or if you're new to it, check out the previous newsletter posts to catch up.
Alrighty, we now have a better idea of how to transact, save, invest, and get paid locally and abroad as an individual and as a business.
If you're doing all of these things, you're quite the busy bee making honey! Unfortunately, the grizzly bear of SARS gets really hungry when you do many honey-making activities...
I don't have too much to say here, as tax is its own huge and complex arena of knowledge that I cannot adequately cover in some articles. You should really consult with tax practitioners and accountants to best handle your finances and tax.
The highlight reel of what I think is important for tax is as follows:
- Focus on earning more than reducing your tax rates. If you can optimise and legally pay less, then go for it, or let your accountant solve that problem for you. You however eventually reach a point where you cannot reduce your taxes any further, except by just not making any money. This is a point of diminishing returns. A good saying I've been told in this regard is: "You cannot cut your way to growth."
- Research how tax residency works for both you and any companies your own abroad, for South Africa and any other countries you plan on spending a lot of time in. TaxTim has a great questionnaire for South African tax residency. I use and highly recommend PWC's Tax Summaries website for researching the basics of taxation and residency in foreign countries.
- No, you won't be double-taxed if you/your company qualify for tax in two countries. Most countries have what are called double taxation agreements. In short, if you owe tax in both countries, and file taxes in one, you'll only owe taxes in the second one if the second one's tax rate is higher. So if e.g. Greece has a tax rate of 20% and I pay that 20%, and South Africa has 30%, I'll owe South Africa 10%. Of course, there are some extra steps in proving you've already paid tax abroad, but the outcome is that you are not being double taxed.
That's all on tax really. It's a very important topic, but much better left to experts.
Part 5 on Monday will tie everything up, as well as provide a lot of extra resources and reading material on all the topics covered in this whole series!
Can't wait for the next one to be released on LinkedIn? The complete guide is available on my website, free of charge, in one long post! Check my profile for info.