What is financial emigration?
Financial emigration simply means your status, according to regulatory authorities – the South African Revenue Service (SARS) and the South African Reserve Bank (SARB) – has changed from resident to non-resident.
Transferring funds offshore
By South African law, expats are allowed to encash and transfer the proceeds of certain policies and retirement funds abroad. These transfers can be made using the annual allowances imposed by the regulator. These allowances are R10 million and R1 million respectively and are called the Foreign Investment Allowance (FIA) and Single Discretionary Allowance (SDA). If South Africans abroad wish to utilise the higher of the two – the FIA of R10 million – they will need to apply for tax clearance, which means your tax affairs will have to be in order if you wish to utilise this allowance.
The benefits of financial emigration
What frightens most people about financial emigration is the idea that it’s all so final.
Using your offshore transfers
Though you are now able to transfer these funds and use as a financial windfall, it may still be advisable to reinvest the funds, not only will this offer you the opportunity to earn interest in a stronger currency than the rand, but individuals residing in the UK stand to increase their pension due to the UK’s pension incentive scheme. And the best part? As you will pay withdrawal tax on encashing your annuity or fund, you will not be taxed again should you wish to return to South Africa at a later stage – your funds will be yours tax-free!
Should you apply for financial emigration?
In conclusion, you may want to consider financial emigration if you answer yes to any of these questions:
- Do you have retirement annuities in South Africa?
- Is there a likelihood that you’ll be the beneficiary of an estate or trust?
- Are you planning on staying abroad indefinitely?
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