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5 things you need to know about financial emigration in 2018

*This content is brought to you by Sable International. With offices in Cape Town, London and Melbourne they have fast become experts in assisting South Africans with all their financial emigration needs.

By Niel Pretorius*

If you’re a South African thinking about leaving the country, the term “financial emigration” is sure to come up more than a few times during your research. Financially emigrating enables you to not only consolidate your financial position, but allows you to unlock funds that would have otherwise been inaccessible. Here are five things you need to know when financially emigrating.

1. Can I withdraw my South African retirement annuities before I turn 55?

Yes. Changes to South African legislation in 2008 allow South Africans who have financially emigrated to access their retirement annuities prior to the age of 55. In order to do so, you will need to change your tax status with SARS and the South African Reserve Bank (SARB) from a tax resident in South Africa to a tax non-resident.

2. Do my tax affairs have to be in order to claim my retirement annuities?

It’s vital that your tax returns with SARS are all in order and your South African tax number is still active when you apply to withdraw your retirement annuity funds. This is because your funds will be taxed at source before the financial provider can make a payment to you.

Read also: How to manage financial emigration: three steps for South Africans moving or living abroad

The provider will need an approved tax directive that will instruct them on how much tax needs to be deducted from your retirement annuity. The only way they get a tax directive is if your South African tax number is active and your tax returns are up to date.

3. Do I need to get tax clearance from SARS?

A tax clearance certificate is a document issued by SARS to confirm that all your tax affairs are in order. The number of years you’ve spent outside of South Africa will determine whether or not you need to get tax clearance from SARS before you can financially emigrate.

If you’ve been outside of the country for more than five years, and have no remaining assets in South Africa, you can apply for financial emigration without a tax clearance certificate. However, if you’ve been outside of the country for less than five years, you will need to get tax clearance from SARS before you can financially emigrate.

4. If I financially emigrate, will I relinquish my South African citizenship?

Many people fear they will lose their South African citizenship when they financially emigrate. The truth is that when you register as a non-resident with SARS and the SARB, you will still be classed as a South African citizen and retain your right to return to the country whenever you choose.

While you’ll still be a South African citizen when you financially emigrate, it can get complicated if you wish to hold dual citizenship. Before you apply for citizenship of a foreign country, you will need to apply for the Retention of South African citizenship. This is to safeguard your South African citizenship when you apply for dual citizenship.

Read also: Fear-mongering and expat tax: Here’s the real facts you need to know

If you don’t apply for the Retention of South African citizenship and you acquire foreign citizenship through naturalisation, you will automatically lose your South African citizenship. This would typically not apply where you are entitled to foreign citizenship as of right, such as birth in that country.

It is possible to reclaim your South African citizenship once it has been lost, but this is a complex procedure. It’s best to use a professional service that specialises in dual citizenship when taking on this kind of task.

5. How difficult is it to financially emigrate?

Unfortunately, it’s not a simple procedure. It requires strict adherence to a myriad of rules and regulations with a heavy administrative burden. There are also tax considerations to be taken into account in respect of various types of assets. The withdrawal stage tends to be the most labour-intensive part of accessing your retirement funds. This is why using a professional financial emigration specialist, who has built a relationship with the relevant financial providers, will take the hassle and stress out of this process. Obtaining all the correct documentation can also be particularly tricky if you have already left the country, so having an expert on the ground back in South Africa can be hugely helpful.

Read also: Nowhere to run: South African tax payers and the Common Reporting Standard

It’s also important to note that when individuals try to financially emigrate on their own, retirement policies and other retirement funds are often not identified in the correct way, or are completely omitted from the application altogether. This can result in unnecessary costs when having to re-apply to the SARB, as well as possible contravention of SARB rules and regulations.

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