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Many South Africans with retirement funds in South Africa often contact us asking how they can withdraw and transfer these funds offshore. Many wish to lessen the effects of Rand volatility, while others simply want to take their investments with them to their new home. Here are some of the most common questions we get asked about financial emigration.

multiple question marks

Click on a question to be taken directly to the answer:

  1. Can I keep my South African citizenship if I financially emigrate?
  2. Financial emigration and Capital Gains Tax – are these related?
  3. Will I get taxed on my retirement annuity withdrawal in both South Africa and the UK?
  4. When I apply to the South African Reserve Bank, what needs to be declared?
  5. Can you assist me with my government pension in South Africa?
  6. What kind of tax can I expect to pay when I withdraw my retirement savings?
  7. Do I need to financially emigrate to access my preservation fund? If not, am I limited to a 1/3 withdrawal?
    7.1 Provident funds
    7.2 Pensions
  8. How can I get my South Africa inheritance paid out to me overseas?
    8.1 Financial emigration
    8.2 Foreign investment allowances
  9. Can I access my living annuity after financially emigrating?

 


1. Can I keep my South African citizenship if I financially emigrate?

Many people confuse the financial aspect of emigration with relinquishing their South African citizenship (passport). If you financially (formally/officially) emigrate, this will only change your status with the South African Reserve Bank to that of a non-resident for exchange control purposes. You will not have to give up your South African citizenship and/or passport to do this.

Think of it this way: Financial emigration is an application made to the SARB regarding your South African residency status for exchange control purposes.

Your South African citizenship is a Home Affairs matter. If you have already acquired or are proceeding with a citizenship application in your new residing country, you will be able to keep dual nationality regardless of whether you financially emigrate or not.

If you intend to do so, we highly recommend seeking professional advice on correctly applying for and maintaining your dual citizenship. In order to retain your South African citizenship whilst acquiring another country’s citizenship, you will need approval from Home Affairs. Our citizenship team specialises in obtaining secondary citizenship for South Africans.

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2. Financial emigration and Capital Gains Tax – are these related?

Financial emigration is deemed a Capital Gains Tax (CGT) event on worldwide assets at the time emigration is recognised. This applies to all assets except South African-based immovable property. It is crucial to take expert tax advice before embarking on this process.

We often encounter clients who have left South Africa and externalised most of their assets (including the selling of a house), leaving behind only insurance policies and retirement assets. In these cases, retrospective recognition of emigration can be applied for. Doing this can mitigate certain CGT issues.

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3. Will I get taxed on my retirement annuity withdrawal in both South Africa and the UK?

UK tax laws around foreign income are extremely complex. There are, however, a few key points in the UK’s legislation and in the Double Taxation Agreement (DTA) between South Africa and the UK.

If your South African pension contributions were made when you were neither living nor working in the UK (and were a tax non-resident of the UK), then there should be no UK income tax on your lump sum payment.

If you continued contributing to an SA scheme while living in the UK, such contributions would qualify for tax relief in the UK. Should you withdraw these funds whilst living in the UK, that portion of the funds withdrawn would be subject to income tax in the UK.

The rules applicable here have been designed to avoid double taxation and tax avoidance. In most cases, you will find that there will be no tax payable in the UK when withdrawing from a recognised pension fund. Such withdrawal is not seen by HMRC as a pension crystallization event (which could be taxable).

You will still be liable for withdrawal tax in South Africa. The withdrawal tax is essentially a reversal of the tax relief you have received previously in South Africa. 

Usually you will have no tax liability on the transfer of the net withdrawal proceeds to the UK from a registered scheme in South Africa. However, given the complexity of these situations, you are strongly advised to chat a tax expert before you make any decisions.

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4. When I apply to the South African Reserve Bank, what needs to be declared?

To have your formal application to the South African Reserve Bank (SARB) for financial emigration approved, you must disclose all of your remaining South Africa assets and liabilities.

Assets must include everything you own, anything you will benefit from or have invested in South Africa. Assets like property, shares, investments, insurance policies, cash, debtors, interests in trusts, timeshares, bank accounts and so on.

Liabilities must include everything you still owe money for. Bonds, personal loans, credit cards and overdrafts are a few of the most common liabilities. When declaring your South African liabilities, you will also need to make it clear to the SARB how you intend to settle these debts.

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5. Can you assist me with my government pension in South Africa?

Unfortunately, we are unable to assist with these kinds of pensions and would recommend you contact the Government Employees Pension Fund (GEPF).

If you have worked for a South African company and you want to know if there was any pension fund set up through them, we would suggest liaising with the HR department of that company.

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6. What kind of tax can I expect to pay when I withdraw my retirement savings?

Below are some tax tables from SARS. Your particular set of circumstances will determine which applies to you. After an assessment, we will be able to tell which applies to your particular situation.

Withdrawal benefit

2017 tax year (1 March 2017 - 28 February 2018)

Taxable income (R)

Rate of tax (R)

0 – 25,000

0%

25,001 – 660,000

18% of taxable income above 25,000

660,001 – 990,000

114,300 + 27% of taxable income above 660,000

990,001 and above

203,400 + 36% of taxable income above 990,000

Figures from SARS

Retirement and death benefits or severance benefits

2017 tax year (1 March 2017 - 28 February 2018)

Taxable income (R)

Rate of tax (R)

0 – 500,000

0% of taxable income

500,001 – 700,000

18% of taxable income above 500,000

700,001 – 1,050,000

36 000 + 27% of taxable income above 700,000

1,050,001 and above

130,500 + 36% of taxable income above 1,050,000

Figures from SARS
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7. Do I need to financially emigrate to access my preservation fund? If not, am I limited to a 1/3 withdrawal?

Depending on the type of preservation fund you have and whether an early once-off withdrawal has ever been taken, you may or may not need to financially emigrate in order to access your funds.

If you have a preservation pension or provident fund and have never withdrawn from it, we have some good news for you. You can take a full withdrawal from this as your once-off early withdrawal. This then would be subject to the withdrawal tax table and not the retirement tax table.

If you have already taken an early withdrawal from your preservation fund, the rules at this point differ depending on whether it is a pension or provident fund.

 

7.1 Provident funds

You can take a full retirement withdrawal option from this fund once you are older than 55. You can access these funds before you turn 55 by transferring the provident fund into a retirement annuity, and then accessing that retirement annuity after you have completed the process of financial emigration (subject to withdrawal tax).

 

7.2 Pensions

If you are older than 55, you are forced to take a 1/3 lump sum retirement withdrawal. If you want to access your full pension (again subject to withdrawal tax), you can do so by transferring the funds into a retirement annuity which you can then access after financial emigration.

Please note that some funds have particular rules surrounding them; this may mean that the above is not possible. Chat to us today and we’ll be able to advise you fully.

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8. How can I get my South African inheritance paid out to me overseas?

For the pay out and transfer of your inheritance funds, you have the following two options:

 

8.1 You can financially emigrate from South Africa

We can assist you with an application to the SARB via an authorised dealer for financial emigration. We can also assist you with opening a non-resident bank account where your inheritance funds could be paid out to and transferred to your overseas bank account. The type of inheritance you are receiving, whether it’s directly from a will or from a trust, would need to be taken into consideration.

Should you have no intention to return to South Africa, this option would tie up your financial affairs here and may be the best option for you. If you are expecting any further inheritance from South Africa, this may also affect your decision. If you financially emigrate, you will be able to access retirement annuities left in South Africa.

 

8.2 Use your foreign investment allowances to remit the inheritance funds if you have a green bar-coded South African ID

First off, this only applies to holders of green, bar-coded ID books. As a holder of such an ID you will be able to use your annual discretionary allowance of R1 million to remit your inheritance funds. You can send an additional R10 million per year via your investment allowances if you obtain tax clearance.

For the above transfers you will need an active tax number and a properly certified copy of your ID book. It may be necessary to reactivate your tax number if you have been abroad for a number of years, we can help you with this.

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9. Can I access my living annuity after financially emigrating? 

If you have already converted your retirement annuity to an income provider, the funds will now be sitting in a living annuity. With your funds in a living annuity, the rules for accessing these funds differ from a retirement annuity. 

Once your funds have been invested in a living annuity, you can only access the funds by taking a withdrawal of between 2.5% and 17.5% per annum.

You can only withdraw the full amount if the value of the living annuity is below R75 000 if you did not take a lump sum at retirement, and R50 000 if you did take a lumpsum. This lumpsum withdrawal is only applicable to living annuities where the annuities have a cash value.

Since a living annuity pays out yearly or monthly, many living annuity holders elect to send their funds out of South Africa as they receive them. However, relying on your bank to do the transfer often results in an expensive fee and a poor exchange rate.

There is a solution. If you’re in this situation you may be interested in our out of South Africa forex service. Our forex team specialises in money transfers out of South Africa and can help you send your living annuity proceeds overseas.

Our forex team specialises in setting up offshore payments for South Africans. There is no minimum transaction size and we’ll handle all the admin hassle of dealing with the SARB and SARS.

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For help with your financial emigration application, or if you’d like us to advise you on anything in this article, email us at safe@sableinternational.com or give us a call on +27 (021) 657 2133.

We are a professional services company that specialises in cross-border financial and immigration advice and solutions.

Our teams in the UK, South Africa and Australia can ensure that when you decide to move overseas, invest offshore or expand your business internationally, you'll do so with the backing of experienced local experts.