What does it mean to Financially Emigrate from South Africa?
There is a lot of talk about financial emigration from South Africa, but what does it actually mean? Financial emigration is the process of terminating your fiscal residency in South Africa. This means that you are no longer considered a tax resident of South Africa and will no longer be liable for income tax, capital gains tax or estate duty. There are a number of reasons why people choose to financial emigrate from South Africa, but the most common reason is to reduce their tax liability. If you are thinking about financial emigration, there are a few things you need to know. In this blog post, we will explore what it means to financial emigrate from South Africa and what the process entails.
What is Financial Emigration?
Financial emigration is the process of moving your money out of South Africa. This can be done by transferring your funds to an international bank account or investing in foreign assets.
There are a number of reasons why people choose to financially emigrate. Some people do it to protect their assets from political or economic instability. Others do it to reduce their tax liability. And some people do it simply to diversify their portfolios and reduce their dependence on the South African economy.
Whatever your reasons for wanting to financially emigrate, there are a few things you need to know before taking the plunge. Here are a few FAQs about financial emigration:
- How do I financially emigrate from South Africa?
The first step is to notify the South African Reserve Bank (SARB) of your intention to leave. You will need to fill out a form and provide proof of your new address and contact details. Once you have been granted permission by the SARB, you can then start transferring your funds out of the country.
- What happens to my South African bank accounts when I financially emigrate?
Your bank accounts will be closed and any remaining funds will be transferred to your new international account.
- Do I have to pay taxes on my foreign income?
It depends on your tax residence status. If you are considered a non-resident for tax purposes, you will only be taxed on your South African-sourced income. However, if you are considered a resident for tax purposes, you will be taxed on your worldwide income.
- Can I still own property in South Africa?
Yes, you can still own property in South Africa even after you have financially emigrated. However, there are some restrictions on how you can use that property. For example, you may not be able to rent it out or sell it without prior approval from the SARB.
What happens to my South African pension when I financially emigrate?
The rules and regulations around accessing certain retirement savings on emigration were simplified in 2021. The previously cumbersome emigration process, which involved applications to the South African Reserve Bank as well as the South African Revenue Service (SARS), was replaced with a “residency test”, which came into effect on 1 March 2021.
This residency test requires a member to prove that they have not been resident in South Africa for an uninterrupted period of three years before they can access their retirement savings. In other words, if you emigrate now, you will have to wait three years after leaving South Africa to be able to access your retirement annuity fund or preservation fund where you have already made use of your once-off withdrawal.
This rule does however apply retrospectively, and if someone left South Africa more than three years ago and can provide the administrator with the necessary proof, they can access their retirement annuity funds and preservation funds and move the net proceeds out of South Africa.
Individuals who have already officially emigrated or whose emigration applications were already submitted by 1 March 2021 and approved by 27 February 2022 will not have to wait out the three-year period.
“There has been much discussion about the new ‘three-year emigration rule’,” says Wellburn. “One of the arguments against the rule is that people emigrating often need to access their retirement annuities and preservation funds to help cover their relocation costs and establish themselves in the country they have emigrated to.
“However, the three-year rule does give the regulator some assurance that the intent to emigrate is substantiated and permanent, and that the individual is not just emigrating to access their retirement savings,” he says.
Why Would You Financial Emigrate from South Africa?
There are many reasons why someone might choose to financially emigrate from South Africa. Some may be seeking a lower cost of living, while others may be looking for political or economic stability. Others may simply want to be closer to family or friends who live overseas.
Whatever the reason, financial emigration can be a big decision. It’s important to do your research and seek professional advice before making any decisions. Contact one of our Virtual Advisers today for quality financial advice!
If you’re considering financial emigration, here are some things to keep in mind:
The process of financially emigrating from South Africa can be complex. Be sure to seek professional guidance to ensure you understand all the implications and requirements involved.
You will need to submit proof of financial emigration to the South African Reserve Bank. This includes providing proof that you have transferred all your assets out of the country.
Once you have financially emigrated, you will no longer be considered a tax resident of South Africa. This means you will not be liable for income tax, capital gains tax or estate duty on any assets you hold outside of the country. However, you may still be liable for these taxes on any assets you hold inside South Africa.
You will need to notify various government departments and agencies of your change in status, including the Department of Home Affairs, SARS and the SABC.
Your access to certain government benefits and services may be affected by financial emigration. For example, you will no longer
What are the Steps to Financial Emigration?
When you financially emigrate from South Africa, you are effectively renouncing your South African citizenship. This means that you will no longer be liable for tax in South Africa. There are a number of steps that you need to take in order to complete the financial emigration process:
- Obtain a certificate of exemption from the South African Revenue Service (SARS). This certificate proves that you have met all of your tax obligations in South Africa and that you are now exempt from paying tax in the country.
- Surrender your South African passport to the Department of Home Affairs. You will need to obtain a new passport from your country of citizenship.
- Inform the South African Reserve Bank (SARB) of your intention to financial emigrate. The SARB will then close your local bank account and transfer any remaining funds to your new overseas account.
- Register as a non-resident for tax purposes with SARS. This is important as it means that you will only be liable for tax on income earned within South Africa – you will not be taxed on your overseas income.
- Finally, update your contact details with the Financial Services Board (FSB) so that they can keep track of your investments and ensure that you are complying with financial regulations.
The Pros and Cons of Financial Emigration
There are a number of pros and cons to financial emigration from South Africa. On the plus side, financial emigrants can enjoy a number of benefits, including access to foreign exchange markets, lower taxation rates, and the ability to diversify their investment portfolios. However, there are also a number of potential drawbacks to consider, such as the loss of certain South African government benefits, currency risk, and the potential for difficulty re-entering the South African economy should you decide to return.
Those who are considering financial emigration from South Africa should carefully weigh the pros and cons before making a decision. Those who do decide to go ahead with financial emigration should make sure that they have a solid plan in place and that they understand all of the risks involved.
How can You Protect Your Money when you Financially Emigrate?
When you financially emigrate from South Africa, there are a few things you need to do in order to protect your money.
First and foremost, you need to make sure that your financial institution is aware of your plans. You need to provide them with an up-to-date list of your assets and liabilities, as well as your contact information.
Next, you need to make sure that all of your accounts are in good standing. This means that you should pay off any outstanding debts and close any unused accounts.
Finally, you need to consider transferring some or all of your assets to a foreign currency. This will help protect your money in the event of currency fluctuations.
Conclusion
There are a lot of factors to consider when deciding whether or not to financially emigrate from South Africa. We have not touched on life insurance and medical aid cover, a number of South African providers extend their cover to overseas.
It’s important to weigh the pros and cons carefully before making a decision, as there is no one-size-fits-all answer. For some people, financial emigration may be the best option for achieving their long-term financial goals.
Others may find that staying in South Africa and weathering the economic storms is a better choice. Ultimately, the decision comes down to what makes the most sense for your individual circumstances.