Everything you need to know about financial emigration

1. Who is Sable International?

We provide professional services to private individuals, small and medium-sized businesses, and clients with international interests or links. We manage the accounting, wealth, financial, currency and nationality needs of our clients and are fully qualified to provide comprehensive financial and immigration solutions.

2. What does the financial emigration service do?

Our financial emigration service assists South Africans, about to leave the country or already abroad, to successfully financially emigrate and recover their retirement annuities and remaining assets in South Africa. We pride ourselves on providing a comprehensive, competitive solution with exceptional customer service and great rates.

Essentially, we help South Africans withdraw their retirement annuities before they mature and transfer that money out of South Africa.

3. How secure is my personal information?

Our clients’ data and information is treated with the utmost respect and security. It will only be used for specific actions as requested by you.

We are registered and accredited with all relevant South African financial institutions and bodies.

4. What is the difference between emigration and financial emigration?

If you emigrate without properly notifying the South African Reserve Bank (SARB), you are classified as a South African resident living temporarily abroad. You will then be subject to the same tax laws and financial regulations as people living in South Africa. If you wish to leave the country permanently and avoid this tax scenario, financial emigration from South Africa is, in most cases, recommended. To do this, you must register your intentions with the SARB.

You will need to ensure that your tax affairs are up-to-date and in order before you submit your application and supporting documents. You may also have to submit a tax clearance certificate from the South African Revenue Service (SARS), depending on how long you have lived abroad.

If the application is successful, the SARB will issue you with a proof of emigration certificate. Once you have financially emigrated you will then be able to use a non-resident bank account to freely transfer your funds abroad.

5. What happens to my South African citizenship if I financially emigrate?

It is often believed that officially emigrating requires you to give up your citizenship and identity as a South African – a very emotive issue. This is incorrect.

Registering an official emigration with SARS and the SARB does not affect your South African citizenship. All that happens is that the SARB declares you a non-resident. Until you actively relinquish your citizenship, you will be classed as a South African citizen and will retain the right to return - and again become a resident - whenever you choose.

6. Can I return to live and work in South Africa if I have financially emigrated?

Being declared a non-resident does not mean you are giving up your South African citizenship. Unless you formally renounce your citizenship, you will always legally be South African. You are able to come back to live and work in South Africa whenever you wish.

To ensure you do so legally and without any restrictions, you will have apply to the SARB to be declared a resident once more.

7. Why should South Africans financially emigrate?

Whether financial emigration is right for you will depend on what kind of retirement funds and assets you hold; it is not necessary for all expats. All South Africans have the annual R1 million single discretionary allowance and R10 million foreign investment allowance (which requires a SARS tax clearance certificate). These can be used for foreign investment and asset transfer without having to financially emigrate. However, if you have retirement annuities that you would like to cash in, then financial emigration is the only option.

There are many reasons to financially emigrate, which will depend on each client’s individual circumstances, however the main benefits are:

  • Being able to access your South African retirement annuities before age 55.
  • Being able to transfer future SA inheritance funds out of the country without being subjected to the SA resident exchange control process.
  • Should you have no intention to return to SA, financial emigration would tidy up your financial affairs with the South African Reserve Bank (SARB) and the South African Revenue Service (SARS).

Until you have formally (or financially) emigrated, your status will be as a South African tax resident temporarily abroad, and you will not be permitted to withdraw your South African retirement funds out of the country.

8. How much does it cost to financially emigrate?

Our service assists South Africans, about to leave the country or already abroad, to successfully obtain a financially emigrated status and recover any remaining assets in the country. Our fees are highly competitive and we encourage clients to compare our service offering with other business in the financial emigration market.

9. How does a South African abroad receive inheritance from a South African source?

If you’re a South African living abroad, you will need to formalise your emigration to receive your inheritance.

Formally emigrating from South Africa means that your status with the South African Reserve Bank (SARB) changes from resident to non-resident. This formalises your exit from South Africa for exchange control purposes. You will not lose your South African citizenship if you financially emigrate.

10. I have been living abroad for several years, how do I formalise my emigration?

You need to formalise your emigration through a local commercial bank in South Africa. To do this you must:

1. Complete a MP336(b) form
The MP336(b) form is an application for foreign capital allowance. This form is available from the SARB website.

2. Apply for a Tax Clearance Certificate
If you’ve resided outside South Africa permanently for longer than five years and you do not possess any assets other than inheritance or insurance policies, it is not necessary to obtain a Tax Clearance Certificate.

3. Submit the MP336(b) form and, if applicable, your Tax Clearance Certificate
You will need to submit any other documentation as required on the MP336(b) form. This might include a copy of your permanent residency permit.

11. What facilities will I qualify for when I emigrate?

If you are an emigrant you will qualify for:

1. Foreign capital allowance
This allows you to transfer R10 million for every adult per calendar year or R20 million per family per calendar year.

2. A travel allowance
Up to R1 million for each adult and R200 000 per child under the age of 18. This travel allowance cannot be granted to you more than 60 days before you’re due to depart.

3. The export of your household goods within an overall insured value of R2 million.
This can include your personal effects, motor vehicles, minted gold bars and coins (excluding any coins that are legal tender in South Africa).

12. What will happen to my remaining South African assets?

Your remaining South African assets must be brought under physical control of the same bank that finalised your emigration. This ensures that all capital accumulating after your date of emigration and the proceeds of your assets sold will be placed to the credit of your capital account.

If your remaining liquid assets exceed the foreign capital allowance limits, you can request that the Financial Surveillance Department of the SARB transfer these assets.

13. Can I transfer the proceeds from my insurance policy directly to my overseas bank account?

Yes. Provided your emigration has been formalised and the foreign capital allowance limit will not be exceeded, proceeds from your insurance policy can be transferred directly to you abroad, when you have no bank account in South Africa.

14. Who do I submit my completed MP336(b) form – Emigration: Application for foreign capital allowance to?

You must submit your completed MP336(b) and any supporting documents to your authorised commercial bank in South Africa. The local bank will be able to assist you in finalising your emigration as far as exchange controls are concerned.

15. Must I liquidate all of my South African assets?

Even if the SARB process is complete, your asset portfolio can remain the same. You can hold and contribute to any assets in South Africa if you want to. Be sure to notify policy and other providers that you reside abroad as this may affect certain conditions for your contracts.

16. Will I need to file tax returns in South Africa?

Even when your financial emigration is finalised, you are not exempt from submitting a yearly tax return with SARS. You will not be automatically de-registered from SARS.

After financial emigration you will only need to declare South African sourced income. You can only deregister for tax once you have no assets remaining in South Africa. This is done through a formal process with SARS and only then will you be exempt from submitting tax returns.

17. Process and benefits of financial emigration

The process to achieve financial emigration is as follows:

1. Complete an MP336(b) form

2. Apply for an emigration Tax Clearance Certificate through SARS
If you have no assets in South Africa and have been out of the country for longer than five years, you can financially emigrate without obtaining tax clearance with SARS.

3. Submit your application to the SARB.

Advantages of financial emigration include:

  • Ensuring your taxes are fully compliant and your tax residency status cannot be reversed
  • No South African tax liability on foreign income
  • The ability to access your South African retirement annuities before the age of 55 without penalties
  • You can transfer future South African inheritance funds out of the country without being subjected to the South African resident exchange control process

18. Financial emigration and retirement, living and life annuities

The amount of capital that you can transfer out of South Africa when you financially emigrate will be determined by whether you have a retirement annuity or a living annuity. Although annuities fall under the classification of retirement products, they are treated differently with regards to tax, accessibility and emigration. Below we compare the different types of annuities and what they mean for you.

Retirement annuities

A retirement annuity (RA) is a pre-retirement investment product. An annuitant contributes funds with the aim of financing their retirement. To encourage these savings, there are certain South African tax incentives that apply when contributing to an annuity.

Since 2008, South Africans abroad who have financially emigrated have been able to cash-in and withdraw their RAs. A South African who is declared a non-resident by the South African Reserve Bank can transfer their capital offshore. While you will still be subject to tax, you are now free to invest in the country of your choosing.

Living annuities

Annuitants assume the responsibility of managing the investment. The capital investment and the withdrawal rate per annum will determine the level of income one can realistically receive from such an investment. This amount is a percentage of the initial capital investment, which is set and adjustable annually. Income is set in the range of 2,5% to 17,5% of the investment per year.

Living annuities are very useful products, but their success is determined by how well the assets perform and the size of the relative annual withdrawals. As is the case with RAs, once funds are invested into a living annuity, the capital cannot be withdrawn. We offer alternative strategies to assist those emigrating or living abroad in gaining access to these types of funds.

Life annuities

Like living annuities, life annuities are post-retirement vehicles. There is, however, a key difference. Where life annuities are concerned, the amassed capital at retirement is used to purchase or buy an income from a life underwriter or insurance provider.

Life annuities are effectively a guaranteed future income stream and cannot be withdrawn. Hence, only future income received from the insurer can be taken out of South Africa as and when received.

19. What is the “expat tax”?

It’s not uncommon for people today to have a primary residence in one country but work and earn income in at least one other country. It was unfair to expect individuals to pay tax in both their country of residence and the country where they earned the income. To relieve the burden of paying double tax, Section 10(1) (o) (ii) of the Income Tax Act provided a tax exemption to South African expats on their foreign income.

The country in which the income was earned has the right to charge tax. The catch, however, is that you need to be outside South Africa for more than 183 days, and at least 60 of those days must be consecutive in any 12-month period. If you met these conditions you were effectively exempt from paying tax on your income in South Africa.

The country in which the income was earned has the right to charge tax. The catch, however, is that you need to be outside South Africa for more than 183 days, and at least 60 of those days must be consecutive in any 12-month period. If you met these conditions you were effectively exempt from paying tax on your income in South Africa.

From March 2020, SARS will remove this exemption as a result of some individuals using this clause to avoid paying tax in any jurisdiction.

20. Why are South African expats worried about the new Income Tax Act?

South African expats outside of the country for more than 183 days in total received a tax exemption on their foreign income.

From 1 March 2020, a new law will come into effect and this exemption will be removed. As a South African tax resident abroad you will be required to pay tax of up to 45% of your foreign income that exceeds the R1 million threshold.

21. Is financial emigration enough to prove I have given up my tax residency in South Africa?

Financial emigration is not enough to prove you have given up your tax residency, and financial emigration alone will not exempt you from being subject to the Income Tax Act. Tax residency status is separate from one’s exchange control status.

 

Find out more about financial emigration

Get in touch

If you are interested in financially emigrating, or recovering financial assets from South Africa, fill out our short financial emigration questionnaire below and a consultant will contact you shortly.

Do you have permanent residence in the country where you reside?*
Do you have a green barcoded ID?*
Please select all remaining assets that you have in SA (if applicable).
Please select all remaining liabilities that you have in SA (if applicable).
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Please do not act in reliance on information published or advised without consulting a suitably qualified independent legal or other professional adviser of your own choosing. Sable International will not be liable for any direct, indirect or consequential loss or damage suffered by any person as a result of their use or reliance on any of the advice provided by any one, or all, of the professional advisers identified by Sable International.

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