Money flooding out of South Africa due to NHI

South Africa’s largest independent tax practice said the approval of the National Health Insurance (NHI) Bill has caused the firm to see a surge in enquiries from South Africans seeking private healthcare abroad and advice on relocating their tax residency.

Tax Consulting SA said the approval of the controversial NHI Bill in South Africa has sparked significant concern across various segments of the population.

President Cyril Ramaphosa signed the NHI Bill into law in mid-May this year. The scheme aims to achieve universal coverage for health services and, through this, overcome critical socio-economic imbalances and inequities of the past.

The legislation provides a framework for the provision of universal care through a state-run fund and will ban the private sector from financing treatment covered under the plan.

While the government has promised that signing the NHI into law will result in universal healthcare free at the point of delivery, this ambition is far from reality.

Apart from challenges relating to whether it will pass Constitutional muster, business leaders and experts are concerned that the scheme has no clear funding mechanism. 

The Department of Health has confirmed that tax increases and other tax changes are planned to fund the NHI. However, it has not been clear which taxes will be raised or if a new tax will be introduced. 

In addition, medical professionals are apprehensive about potential mandates to work for the government, families with at-risk members fear for their loved ones’ care in the future, and taxpayers are worried about the financial implications. 

“These factors have collectively prompted a surge in enquiries within our expatriate tax firm regarding private healthcare abroad as well as relocating their tax residency,” the company said.

The firm said there are two options available for South Africans looking to take this route.

The first option is to stay in South Africa but seek a backup plan through investment migration. 

“By participating in residence or citizenship by investment programs, families can secure improved travel and economic mobility, diversified opportunities, and a safeguarded physical and financial future,” the firm said.

“With the NHI Bill’s implementation, safety, security, first-class healthcare, reliable infrastructure, and better family prospects have become paramount considerations.”

For those looking for a plan B or a future exit strategy, countries boasting excellent private healthcare systems, such as Australia, Canada, and Switzerland, have emerged as attractive destinations for investment migration. 

These countries offer residence rights with a route to citizenship to investors and their families in exchange for substantial investments.

According to the Henley Ultimate Portfolio, the following countries all offer investment migration programs that are popular among South Africans. These countries also have a far higher score out of 100 in the private healthcare parameter than South Africa –

• Australia: 76
• Canada: 76
• Switzerland: 74
• New Zealand: 58
• Italy: 50
• Portugal: 50
• Malta: 41

“These scores stand in stark contrast to South Africa’s score of 25, again reinforcing the need for South Africans to look abroad,” the firm said.

The second option available to South Africans is financial emigration for taxpayers seeking to move abroad.

This option – if done correctly – will cease your South African tax residency and, therefore, allow you to successfully cut ties with SARS, avoiding the impact of the implementation of the NHI Bill altogether. 

Financial Emigration is the process used by many South Africans abroad to formalise their non-resident tax status for both tax and exchange control purposes. 

“It is important to understand that simply moving abroad does not negate one’s obligations to SARS unless the formal process is successfully completed,” the firm warned. 

“Cessation of tax residency allows you to protect your foreign-earned income from being taxed by SARS, along with many other benefits. This freedom entails a complex step-by-step process, including obtaining a SARS Notice of Non-resident Tax Status Letter.”