Tax tips for wealthy South Africans emigrating to the US

Tax tips for wealthy South Africans emigrating to the US

BusinessTech | 20 March 2023

There are three areas of concern that high net-worth individuals looking to emigrate to the United States must consider to ensure that their wealth is secure.

America is a popular destination for South African emigrants, with data from Statista showing that over 100,000 South Africans lived in the US in 2020 – trailing only the United Kingdom and Australia in the number of South African ex-pats.

According to Tax Consulting South Africa, the three 00main areas of concern include visa options, relocation plans, and tax emigration.

Visa options

George Ganey, a founding partner at Ganey Law Group, said that the most common residency via investment route is the EB-5 Immigrant Investment Program visa.

The EB-5 requires investment in an enterprise that creates jobs for US citizens. It costs $900,000 for specially designated areas and $1.8 million for non-designated areas.

The investor and their family are given conditional permanent residence and can be given a green (a permanent residence) card after two years.

“The EB-5 visa is certainly the most effective for South Africans, as recent legal reforms offer greater protection to investors, more clarity around timelines, and other assurances,” Ganey said.

Employees of existing or new branches of multinational companies can also enter the US via the the L-1A or New Office L-1A visas. Both visas can eventually lead to permanent residence status.

Ganey added that the once viable E-2 visa is no longer an option for South Africans due to changes in the law.

Relocation plan

One also has to carefully plan how they will process the relocation of their family, wealth and business to the US.

Sheldon Halcrow, President of Caleo Capital USA, said that it starts with a needs analysis.

“Many people have their hearts set on the US without considering it’s a country of 50 independently governed states, each with its own unique economy and culture,” Halcrow said.

Although employees go to where they are sent, the independently wealthy should look for the state that holds the best business and investment opportunities – including tax benefits. This is on top of the lifestyle that they want for their family.

Moreover, a global asset inventory can highly areas of concern, deal with regulatory issues, and create a wealth migration roadmap.

Finally, those looking to immigrate should sequence the journey carefully as the transition can happen over phases in the long term – synchronising each step is crucial.

“A sequencing document, along with regular reviews, ensures that when they land, much of the groundwork has already been done, like opening a bank account, having a US cell phone, or obtaining a means of ID,” says Halcrow.

Tax Emigration

Exiting South Africa is a crucial step for gaining entry to the US, particularly from a tax perspective.

“You need to develop a detailed roadmap that clearly defines where you are coming from and where you want to go and contains a definite plan on how to get there,” Thomas Lobban at Tax Consulting South Africa said.

Although many South Africans are eager to leave the country, some are unaware that their tax obligations in South Africa do not disappear when they leave the nation’s borders.

In the US, these emigrants must pay taxes under South Africa’s residency-based tax system.

They will need to formally cease tax residency by notifying SARS and providing it with evidence that they will reside in another country.

Failing this, they can rely on the double tax agreement (DTA) to protect their foreign wealth from being taxed twice. The DTA will require a formal application during each year’s tax return.

“Such concerns need to be addressed in the planning phase because, after landing on US soil, it may be too late to revise your tax strategy,” Lobban said.

www.samigration.com

The emotional impact of emigration, through the eyes of an artist

The emotional impact of emigration, through the eyes of an artist

20 March 2023 | Daily Maverick

As an emigration therapist, I have the privilege to explore the world of emigration through the eyes of my clients. Everyone’s experience is unique. Emigrants venture into a new, unknown world: they leave the familiar to start afresh amid new cultures and environments. Some recall a profound sense of being emotionally uprooted, others fully embrace the opportunities presented and continue to thrive. Yet, some experience both.

Art and the world citizen

We live simultaneously in two worlds: the outer world of experiences, circumstances and situations, and the inner world of reactions, emotions and thought. Emigration presents this same dualism: in our outer world of circumstances and situations we or a loved one emigrates and we react to that experience in our inner world of thoughts and emotions. In my encounter with the art of French sculptor Bruno Catalano I found that art presents this same dualism and can therefore help us in exploring the depth and complexity of this phenomenon. Through his art, he delves into the universal themes of travel, journeying and migration. 

In 2013, Catalano created 10 life-size bronze sculptures which were displayed along the waterfront of Marseille to commemorate the city’s status as the European Capital of Culture. Aptly titled Les Voyageurs, the sculptures, the most famous of which is now on permanent display in Calgary, Canada, depict 10 different travellers with large portions of their bodies missing, each carrying a suitcase. Stunningly imperfect, these “hollow” figures resonate the story of the modern-day soul, the traveller and the emigrant. Despite their bodies being open to the wind and light, each retains its balance and coherence.

Catalano, an emigrant himself, was born in Casablanca, Morocco, and moved to France to settle in Marseille at the age of 12. He went on to become a sailor and considers himself an eternal migrant. Catalano was always in the process of leaving: “far from my roots, wanting to leave, curious to look elsewhere, to see what happens”; a nomad who does not belong to any one place. To him, these sculptures represent the world citizen.

To Catalano, migration is an intimate journey. While each of these statues carries a single suitcase that weighs them down, these suitcases also serve as their only means of support. The suitcase represents experiences and desires; a container filled with memories that grounds the emigrant and provides support. Catalano refers to this as “roots in motion”.

Art and the emigration therapist

Emigration outcomes are often depicted as fairy-tale endings, with successful emigrants thriving in their new country, rarely looking back with regret. However, the reality shared with the emigration therapist is often the contrary, often relating  the challenges experienced, the sadness and loss of all that was known and loved. This is strikingly expressed in the missing parts of the statues by Catalano. The large missing parts in the statues entices the viewer’s imagination. 

As an emigration therapist, I was encouraged by Catalano’s art to re-examine my thinking and approach towards emigration. In every person’s life, there are incomplete experiences, missing pieces of a larger puzzle. Catalano’s art speaks to this reality through the missing parts of the statues. Art can complement the conversation during therapy, as both the artist and the audience exhibit some level of emotional vulnerability. 

We are all nomads on the journey of life. We have all experienced the excitement of the new, and the sorrow of the loss of what we have left behind. Emigration leaves one feeling ungrounded, floating and uncertain about the future. While the journey is difficult, we find the strength to carry on by embracing our experiences and desires, “our roots in motion”. 

Catalano’s “in transit” bronze sculptures resonate with many, capturing the essence of the emotional impact of emigration. DM/ML

www.samigration.com



Why asylum seekers are choosing Canada in record numbers

Why asylum seekers are choosing Canada in record numbers

Last year, nearly 40,000 migrants crossed into Canada at an unofficial border at the end of a remote rural road in upstate New York - a record number - to seek asylum. Many are driven by the belief that the country is more welcoming than the US. But can Canada handle the influx?

20 March 2023 | BBC News

On a snowy winter day, Roxham Road is cold and quiet. The silence is interrupted by the sound of wheels approaching the end of the path, or the crunching of footsteps on snow.

Around 150 migrants are dropped off here each day, determined to step foot into Canada. Many began their journey as far away as Brazil, with this road in New York state as their finish line.

Roxham Road is not an official border point. There are no border agents at the end of it, only police officers who arrest those who cross.

But it has become known as an accessible spot to enter Canada from the US in order to claim asylum.

Last year marked the highest influx of migrants into Canada via that pathway - with thousands lured by the country's reputation for helping those fleeing war and conflict.

The influx has led to growing frustration on both sides of the border about the path, increasing concerns about its safety, and questions about what the future holds for those who make the journey.

Roxham Road rose to national attention in 2017 when migrants, fleeing displacement and conflict, began crossing there in large numbers.

Some pinned its sudden popularity to fears of deportation from the US under the Trump administration, others to a tweet by Prime Minister Justin Trudeau that read: "To those fleeing persecution, terror & war, Canadians will welcome you".

The influx caught Canadian officials off guard. Montreal's Olympic Stadium was briefly converted into housing for newly-arriving migrants. The federal government tried to stem the tide with warnings that arrival in Canada was not an automatic ticket to stay.

The Covid-19 pandemic closed the route under emergency health measures enacted by the federal government but demand for a safe haven never dissipated.

Thousands of asylum seekers came again when those measures were lifted some 16 months ago.

Many come from Haiti, a country rocked in recent months by political and gang violence. There has also been a surge of people arriving from Latin American countries like Venezuela and Colombia, or from as far away as Afghanistan, all dealing with their own domestic turmoil.

At the same time, the Biden administration has extended some Trump-era pandemic policies like Title 42, which has been used to block land entry at the US-Mexico border for some migrants.

Migrants who spoke to the BBC in Quebec said they increasingly view the US as not a viable country for refuge, where asylum claims can often take years before they are heard, and where they feel they are not welcomed.

Joshua arrived in Montreal two days after Christmas and now shares a rented flat with other migrants as he awaits for his claim to be heard.

A native Venezuelan, he had been living in exile in Chile for five years without travel documents when he decided to make the trek up to Canada, he told the BBC.

"Other countries, they're not so friendly with irregular immigrants," said Joshua, whose name has been changed to protect his identity as someone fleeing political persecution.

But Canada, he said, has welcomed him.

Behind the influx is a nearly two-decade old agreement with the US - the Safe Third Country Agreement - which requires migrants to file for asylum in the first 'safe' country they step foot in.

A migrant coming from the US would be turned away at a Canadian border point but Roxham Road, an unofficial path, is a loophole.

Mr Trudeau has dismissed calls to close the crossing, suggesting it would be futile given the thousands of kilometers of undefended border with the US and that migrants would dangerously attempt to cross elsewhere.

He has focused instead on renegotiating the agreement - an issue he is expected to raise with Joe Biden when the president visits Ottawa later this week.

But the prime minister is facing pressure to take action as the new arrivals strain social services, especially in Quebec, where many of the migrants settle.

Quebec Premier Francois Legault has called the situation in the province untenable, saying services have been "pushed to the brink" and that some migrants are facing homelessness as a result.

"It is becoming increasingly difficult to receive asylum seekers with dignity," he said in February.

Migrants also face a growing backlog of refugee claims, which grew from 56,300 in January to almost 71,000 by December - a 26% increase. Claims can now take up to two years to process. Around 28% of all claims were rejected last year, meaning success is not guaranteed.

There are also lengthy waits for work permits.

It used to take a week to get a social insurance number for a new asylum seeker. Now, the wait for an appointment for the ID document is nearly two years, said Maryse Poisson, who works at the Welcome Centre, an organisation assisting newcomers in Montreal.

Many migrants have struggled to make ends meet as a result, and some have resorted to accessing food banks and other social supports as they wait, advocates told the BBC.

"Some of them are in a situation where they have to accept work under the table," said Suzanne Taffot, an immigration lawyer based in Montreal who helps asylum seekers with their claims.

Ms Poisson said she fears some of them are falling through the cracks without additional government support.

"We're really worried that the most vulnerable, those that have trauma, those that have a lot of barriers of language, don't get the help they need at all," she said.

US border agents have noted an uptick of people crossing back from Canada. In January, US Border Patrol apprehended 367 people attempting to cross north to south - more than the number of such crossings in the last 12 years combined.

Republican lawmakers have since spoken out about a "crisis" brewing at the northern border.

Some of those who cross back have done so from frustration with being unable to find work in Canada, or to reunite with family, people who work with asylum seekers in Montreal said.

Despite the growing challenges in Canada, migrants continue to cross Roxham Road in record numbers, undeterred even in the midst of the bitter Canadian winter.

On the New York side of the crossing, taxi drivers Terry Provost and Tyler Tambini said they often drive people to the border from the Plattsburgh bus station - sometimes for free as some migrants run out of money towards the end of their journey.

"This guy had no money. He's been waiting and waiting at a motel," said Mr Provost as he dropped off an asylum seeker from Afghanistan.

Once the migrants cross, they are greeted by members of the Royal Canadian Mounted Police, who warn them that they will be placed under arrest if they step forward.

Once a ditch with some brush and trees, since 2017 the Canadian side of the border has turned into a small police compound, complete with trailers to process those who cross and buses that wait to bring the newcomers to hotels nearby.

Mr Provost said he sees people hesitate before they make the final step, unsure of what awaits them on the other side.

But for migrants like Joshua, Canada is the last safe place on the line.

"The American dream died many years ago," he told the BBC. "Montreal is my new home. The only home I have."

www.samigration.com

DHA official presents higher visa backlog than Motsoaledi initially reported due to corruption

DHA official presents higher visa backlog than Motsoaledi initially reported due to corruption

News 24 – 20 March 2023

Published Mar 15, 2023

Cape Town - Some of the backlogs in visa applications were caused by corruption and suspensions at the Department of Home Affairs (DHA), MPs were told by a department official, who presented higher figures than initially reported.

DHA acting deputy director-general for immigration services, Yusuf Simons, told the Home Affairs portfolio committee members that corruption in the department played a role in the backlog.

Simons also presented higher figures of the backlog than those DHA Minister Aaron Motsoaledi recently reported in a parliamentary response to DA MP Adrian Roos.

“This is a key matter that affected the turnaround times and our ability to finalise applications and probably contributed to the backlog ... (it’s) the findings from the Lubisi report on the irregularities and corrupt practices that happened with inland applications as well as applications at the missions,” Simons told MPs.

He said the department had, since the Lubisi report, implemented strict measures to curb corruption.

Simons said the capacity in the department’s permitting office was hamstrung by the suspensions of four officials, including a director, and the dismissal of two officials, including a chief director.

DHA Minister Aaron Motsoaledi in February last year appointed a panel, led by Dr Cassius Lubisi, against the backdrop of the questionable issuing of permanent residence permits to Malawian fraud-accused Shepherd Bushiri and members of his family.

The panel also found that 12 officials had a hand in irregularities in the awarding of some visas and permits.

Earlier this month, Motsoaledi told MPs his department is saddled with a visa backlog crisis of 40365 applications for permanent and temporary residence, attributing it to the Covid19 lock downs and labour shortages. 

In the committee, Simons revised the number to 49 529 when the eight-month cycle of 9 145 applications is considered.

“For temporary residence, in order to have a definite count of the backlog, visa applications that were older than six weeks (were) 55 172 (from 2020 to 2022),” Simons said.

“Total applications received within eight weeks stand at 23 988 as of March 1, 2023.

“In total, including the backlog, the figure stands at 55 172+20 642 = 75 814.”

www.samigration.com

How much it costs to buy a bar or pub franchise like Tiger's Milk, News Cafe, Cubaña, or Bossa


How much it costs to buy a bar or pub franchise like Tiger's Milk, News Cafe, Cubaña, or Bossa

20 March 2023 | News24

South Africa's bar and pub scene has changed significantly in recent years - particularly when it comes to national franchises. 

What was once a market dominated by a handful of traditional pubs and bars has seen the line blurred between bar, pub, and restaurant - to create a safer jack-of-all-trades model.

Many South African bars now tend to look more like restaurants - doing quieter trade during daylight and ramping up with live music, DJs, and drinks specials in the evenings. 

They also tend to serve simple meals like burgers and pizzas throughout the day and late into the evening - a move that likely increases the appeal and potential revenue versus the days of grabbing a few evening pints at the bar.

It's a move that seems to be paying off for some franchisors. The bar, restaurant, and canteen industry is forecast to see revenue of over R100 billion in 2023 - and South Africans have a problematic love for alcohol that's further driving revenue in the liquor trade. 

The hybrid model may increase potential revenue for individual stores - but adding full-service kitchens, wide menus, and bigger floor space also increases establishment costs.

It's not something that appears to have restricted the rollout of some bar franchises.

Newer franchises that exploit this hybrid model, like Life & Brand's Tiger's Milk, and to a lesser extent La Parada, have seen significant expansion in recent years. Industry stalwarts, like News Cafe and Cubaña, have lost a few branches in recent years but remained otherwise stable with national store networks.

Here's how much it costs to open a bar or pub franchise like Tiger's Milk, La Parada, Rhapsody's, News Cafe, Cubaña, Bossa, or Brazen Head:

The Brazen Head

The Brazen Head is one of the few remaining Irish pub-style franchises available in South Africa. The first Brazen Head franchise store opened in 2003, and although growth has been muted, there are now five branches, mainly in Johannesburg's northern suburbs and East Rand. 

The pub offers a variety of relevant food and drinks for evening entertainment, with some stores branching out into lunch and breakfast, too.

Cost to open a Brazen Head franchise: A new Brazen Head franchise requires a R120 000 franchise fee and recommended capital of R150 000. Establishing a branch costs an estimated R2.4 to R3.5 million. Franchisees must pay ongoing advertising, marketing, and management fees totalling 7% of turnover.

Tiger's Milk

Tiger's Milk started as a single store in Cape Town's Muizenberg and has seen rapid expansion in recent years. There are now more than 20 branches located throughout the country, with a strong focus on what they call "dude food" and a wide range of alcohol products.

Much of their expansion has come through a franchising model overseen by Life & Brand, who also sell similar franchises in the restaurant space. 

Cost to open a Tiger's Milk franchise: A new Tiger's Milk franchise requires an initial franchise fee of R400 000, and building out a new branch costs approximately R15 000 per square metre. Once established, franchisees must pay 8% of monthly turnover towards management and marketing fees. In total, franchisees will need between R6 and R8 million to buy a new Tiger's Milk store.

www.samigration.com