Easy way for South Africa to attract rich foreigners and make billions in extra tax

Sygnia founder and CEO Magda Wierzycka urged South Africa to attract wealthy foreigners by offering them a flat tax rate of R2 million per year.

Cape Town and the Garden Route are already a favourite among many wealthy international individuals who make it their second home.

However, South Africa can make it even more attractive by offering high-net-worth foreigners a flat tax rate of R2 million per year.

This strategy to attract rich foreigners has been implemented in many countries, including Greece and Italy.

In Greece, high-net-worth individuals (HNWIs) enjoy significant benefits if they move their tax residency to the country.

Under its non-dom tax regime, investors pay a fixed tax of €100,000 tax year, regardless of their total income earned abroad.

The same happens in Italy. Individuals who transfer their residence to Italy benefit from a substitute tax on income produced abroad.

They pay a fixed tax of 100,000 euros for each tax period, regardless of the income received.

Wierzycka said South Africa should do the same as Greece and Italy and offer wealthy foreigners a flat tax rate.

She suggested €100,000 per annum on all income earned offshore in exchange for tax residency.

Apart from contributing tax revenue to South Africa, rich foreigners will also spend money in the country and generate employment.

To put the proposal in perspective, there are very few South Africans who pay R2 million per year in tax.

Only around 164,000 South Africans have a taxable income above R1.5 million per year. However, they pay only a portion of that in tax.

It would greatly benefit the country to get rich foreigners to move their tax residency to South Africa and pay SARS R2 million per year.

Any country wants to attract these people because they contribute to the economy and generate business and employment opportunities.

Such a tax regime aligns with the City of Cape Town’s initiative to attract remote workers from across the globe.

In May 2024, the Department of Home Affairs implemented a Digital Nomad Visa, which allows foreign nationals who earn over R1 million annually to reside in South Africa.

The City of Cape Town’s MMC for economic growth, James Vos, said this visa will boost their visitor economy and benefit local businesses.

“Our own research shows that these working tourists spend up to R50,000 during their time in Cape Town,” he said.

“By enabling remote workers to stay longer in our city, we can substantially boost our tourism value proposition.”

He said these visitors would spend more money, which would benefit various local businesses and services in the city.

“We have signed partnerships with industry bodies and marketing agencies to ensure that our destination is showcased effectively,” he said.

“We are also working on a special marketing campaign that will connect with digital nomads the world over.”

Cape Town has partnered with the homestay platform Airbnb to highlight Mother City’s value as a destination for international remote workers.

The city is already a playground for the rich and famous, and adding favourable tax conditions for high-net-worth individuals will further increase its appeal.