close menu

Financial emigration: We answer all your questions

by Lucy Smith | Feb 21, 2017
  • 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.
    financial emigration

    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.

    Back to the top

     


    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.

    Back to the top

     


    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.

    Back to the top

     


    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.

    Back to the top

     


    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.

    Back to the top

     


    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
    Back to the top

     


    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.

    Back to the top

     


    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.

    Back to the top

     


    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.

    Back to the top

     


    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 (0) 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.

    • trust-handshake
      But, do you know your forex broker’s name?
      Oct 10, 2018  |  by Saskia Johnston
    • risk-ahead-sign
      Increase your business’s bottom line with currency hedging
      Jun 06, 2018  |  by Calvin Matsaure
    • dollar-euro-birdcage
      Is your forex broker saving or costing you money?
      May 15, 2018  |  by Tim Smith
    • international-money-transfers-globe
      How to choose the right forex partner for your business
      Dec 11, 2017  |  by Saskia Johnston
    • dollar-vs-rand-depreciation
      Uncertainty is here to stay, so how do you roll with the punches?
      Nov 24, 2017  |  by Gary Kockott
    • rand spiral blog
      Can the Rand make a comeback? Or is it too late?
      Oct 20, 2017  |  by Andrew Rissik
    • business-man-chasing-thief
      Scam warning! Australian importers beware
      Oct 18, 2017  |  by Tim Smith
    • Piggy bank and rain
      Protect your wealth from exchange rate volatility
      Jul 12, 2017  |  by Anton Van Teylingen
    • busisiwe-m-and-jacob-z
      Who’s propping up the Rand?
      Jun 21, 2017  |  by Andrew Rissik
    • zuma under questioning
      Making cents of the Rand: Are we at the mercy of Jacob Zuma?
      May 26, 2017  |  by Andrew Rissik
     
     

    South Africa

    Cape Town

    Regent Square
    Doncaster Road
    Kenilworth 7708 +27 (0) 21 657 2120

    Durban

    201 The Annex
    Ridgeside Office Park
    Umhlanga +27 (0) 31 536 8843

    United Kingdom

    London

    Castlewood House
    77/91 New Oxford Street
    WC1A 1DG +44 (0) 20 7759 7514

    Croydon

    5-7 Selsdon Road
    South Croydon
    CR2 6PU +44 (0) 20 7759 7581

    Australia

    Melbourne

    9 Yarra Street
    South Yarra
    VIC 3141 +613 (0) 8651 4500

    Sable International is a trading name of 1st Contact Money Limited (company number 07070528), registered in England and Wales. We are authorised and regulated by the Financial Conduct Authority in the UK (FCA no. 517570), the Financial Services Conduct Authority in South Africa (1st Contact Money [PTY] Ltd - FSP no. 41900) and hold an Australian Financial Services License issued by ASIC to deal in foreign exchange (1st Contact Group - AFS License number 335 126).

    This site uses cookies, read more or close this notice.