South Africans who have already emigrated, or are thinking of doing so, have probably heard of the process of financial emigration. This process is more than just sending your South African assets overseas when you leave. Financial emigration allows you to withdraw and transfer your retirement annuities offshore before the age of 55. This way you don’t have to leave your retirement savings behind when you emigrate.

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Convert your retirement annuities to cash and send them offshore

Financial emigration is the process of changing your status with the South African Reserve Bank, for exchange control purposes, from resident to non-resident. This does not have any implications for your South African citizenship. You will always legally be a South African and you can return to South Africa to live and work whenever you wish.

While it’s not simple, the benefits of financial emigration can be immense. The complexity of your application will differ depending on your circumstances, but whatever your circumstances, the benefits usually outweigh the hassle of this admin heavy process.

Financial emigration will allow you to access and transfer the following out of South Africa:

  • Proceeds from your South African retirement annuities before age 55
  • Future inheritance funds without being subjected to the South African resident exchange control
  • Passive income from rental, dividends, director’s fees or a salary
  • Proceeds from a third-party life policy

If you leave South Africa without financially emigrating, you will be deemed to be a South African living temporarily abroad for exchange control purposes. You can begin the process of financial emigration from your new home and it need not be a complicated affair if you engage the right people.

Move all your South African-based assets abroad

Financial emigration is not technically required to move the proceeds of other assets, such as bank accounts, discretionary funds, living annuities, property and life insurance policies.

The initial and ongoing tax treatment may differ significantly between different assets, so it is vitally important that you obtain the correct advice before making any decision or applications. This will ensure that you make an informed decision and not face repercussions later.

An authorised dealer will take control of your assets in South Africa

Your bank account would need to be closed and any cash proceeds of any of your assets will be paid into a designated “blocked” bank account. This account is used solely to transfer your funds overseas. It is also possible to have a non-resident bank account in South Africa should you need to pay property taxes, maintenance or insurance policies, but this is separate from your blocked account.

It is also important to note that there is no requirement for you to liquidate any of your assets in South Africa when you financially emigrate. You can liquidate these assets as you wish and transfer the funds abroad through your blocked account.

Avoid being stung by SARS

Financial emigration does not render you free from taxation in South Africa. You will still have to pay taxes in South Africa on South African-sourced income. This could include interest on capital invested in a local bank or income from property rental.

You will also be subject to paying tax on your worldwide assets should you meet the requirements of the physical presence test in South Africa. It is vital that this test be taken into consideration before you begin the process of financial emigration, should you intend on spending a significant time in South Africa once you’ve emigrated.

Tax implications and planning opportunities in your new country

It’s important to be aware of potential tax implications in your new country of residence, as well as the potential opportunities that may exist to implement tax-efficient plans using the country’s domestic legislation. We recommend seeking the advice of someone who has experience in cross-border financial planning and tax planning to ensure that you make the right decisions.

The process is complex, so take your time to make your decision

Start by doing some research to make sure you know exactly what the process involves and whether it is the right decision for you. It’s advisable to use the services of a credible provider that is experienced, suitably qualified to advise and guide you and properly licensed by the South African Financial Services Board (FSB).

Should you have any questions about financial emigration, Sable International's team of experts are ready to assist. Give us a call on +27 (0) 21 657 2133 or send us an email on safe@sableinternational.com.

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.