Financial Emigration: The South African expats cashing out and taking control of their Retirement Annuities.
Why South African Expats are using Financial Emigration:
South African expats from all over the world are turning on to the Financial Emigration process. If you are under the age of 55 and have contributed to the Retirement Annuity structure, then you may be eligible to take control of your assets cash out your policy and re-invest it how you wish.
Three of the main reasons SA expats are doing this is to protect themselves from:
- Currency exposure of the Rand, as well as
- To have total control of how their pensions are invested.
- To protect against rumours that the ANC government wants to implement “Prescribe assets” in order to fund state owned enterprises and using RA funds to do this.
South African expats living abroad who do not intend to return to South Africa and that are under the age of 55 can now withdraw their full retirement annuities (RA’s) from SA by means of financial emigration.
Currently under normal circumstances a SA citizen that contributes to a RA can only make a third withdrawal up to the age of 55 where after the remaining amount will be used in order to pay a monthly annuity.
Financial emigration is a South African exchange control process which is regulated by the South African Reserve Bank (SARB). Part of the process is obtaining a tax clearance for emigration from SARS in order to financially emigrate.
Once the emigration has been formalised the client has the right to withdraw his full retirement annuity from the financial institution in SA and have it transferred to an offshore account of his choice via his SA blocked emigration account held by his SA bank.
Tax will however be paid on the withdrawal amount by the client which will be determined by the South African Revenue Service (SARS) upon application of a tax directive by the financial institution.
Before you start: Want to cash out and take control of your retirement annuity?
There are a few things that one must keep in mind. There might be a pre-requisite to financial emigration or which might happen during the financial emigration process.
- The SA taxpayer must be compliant with regards to their SA tax obligations.
- All unsecured debt in SA for example credit cards and overdraft facilities must be paid in full and closed.
- You must be in possession of a residency permit, VISA or citizenship from the country you reside in.
- Proof of tax residency issued by the revenue authority of the country you reside in.
- On emigration there is the possibility of a deemed disposal which will trigger a capital gains tax event on certain assets (excluding fixed property).
- Your bank account in SA will change to that of a blocked emigration account and you will be restricted from performing online transactions via your banking site.
The following misconceptions are also not true:
- You will (NOT) lose your SA citizenship.
- All assets in SA needs to be disposed of as part of the process.
For SA expats not intending to return to SA and want to retire in another jurisdiction it makes financial sense to transfer your RA and/or pension offshore. You will then have it in the currency that your cost of living would be for example US $ or Euro.
By leaving your funds in SA especially if it is already paid up you run the risk that it will devalue due to currency exchange fluctuations.
With the rumours that the ANC government wants to implement “Prescribe assets” in order to fund state-owned enterprises there is the risk that RA’s and pension fund values of investors can decrease even more.
This article has been prepared by Hein Maij of Findomicile.
Tax Advisors: Findomicile
Hein Maij (MTPSA) and his team of highly skilled professionals currently assist SA expats all over the world with any SARS (South African Revenue Services) tax compliance issues as well as the financial emigration process.
They deal with the full end to end process i.e. the local bank of the client in SA, SARS as well as the financial institution where the client’s funds are that needs to be withdrawn.
If you have any unresolved tax compliance issues then they need to be dealt with before the financial emigration process can begin. Findomicile are fully capable to assist.
The other members of his team are a qualified tax attorney (Ricardo Scholtz) and two employees on the admin (Benita de Sousa) and compliance side (Sandra van Eeden).
All the members of the team are ex SARS personnel. In total they have over 90 years SARS experience collectively.
3 members are registered Tax Practitioners with the South African Institute of tax professionals (SAIT) of which two are Master Tax Practitioners.
Please note that this publication has been carefully prepared and has been written in general terms. Therefore it should not be taken as financial advice. The publication cannot be relied upon to cover specific situations and you should not act upon the information contained therein without obtaining specific professional advice.
We do not accept or assume any liability or duty of care for any loss arising from any action taken, or not taken by anyone in reliance on the information in this publication or for any decision based on it.