Real Estate Investor Magazine South Africa November 2018 | Page 54

EMIGRATION
Financial Emigration -
Should I stay or should I go?
BY JOHN DUNN
E
migrating to another country can be as stressful as it is ex-
citing. It’s difficult enough to relocate your possessions, but
it becomes even more complex when the time comes to
transfer your financial assets abroad. Can you just use your foreign
investment allowances to move your money or do you need to
financially emigrate? There are reasons to emigrate and reasons
not to, and there are cost implications to emigrating – one doesn’t
always need to emigrate considering the allowances already avail-
able to private individuals. Tim Powell, director of forex at Sable
International, looks at the reasons for and against financial emi-
gration
What is financial Emigration?
Since South Africa has exchange control legislation governed
by the South African Reserve Bank, when South Africans go
and live in another country, they have the option of financially
emigrating as well and effectively placing their emigration on
record with the South African Reserve Bank. Once you have
financially emigrated, the South African Reserve Bank will
change your residency status from resident to non-resident and
your bank will open a blocked Rand account where all your South
African assets will be housed for transfer overseas. This change in
your residency status has no effect on your right to South African
citizenship or South African passport, it is simply an exchange
control matter.
Use your allowance now, financially emigrate
later
If you intend on moving to another country, you do not have to
financially emigrate to start transferring your wealth abroad. You
are able to utilize your foreign allowances as follows:
• Up to R1 million per year discretionary allowance – no tax
clearance certificate required.
• Up to R10 million per year investment allowance – tax
clearance certificate required.
• To transfer more than R10 million you will need a tax
clearance certificate and you must submit an application to
the Financial Surveillance Department of the SARB for
approval.
“We recommend that if you do want to financially emigrate,
that you first take out what you can with your allowance and
then start the emigration process, as it can take three months to
complete and you may want access to your money immediately.”
Which assets require financial emigration?
Moving overseas, you would need to consider the following assets:
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NOVEMBER/DECEMBER 2018 SA Real Estate Investor Magazine
• Your retirement annuity, pension and provident funds
• Assets declared in your application
• Inheritance you may receive in South Africa
• Proceeds from life policies
• Passive income received from sources such as annuities,
rental, trusts and payments for services rendered in South
Africa
All of the above-mentioned assets, except for retirement
annuities, can be transferred without financial emigration, as
long as the value falls within the annual allowances.
“If you’re living overseas and your only remaining asset is a
retirement annuity policy, you may want to financially emigrate
as the rules around retirement annuity policies require that the
only way you can encash them, is to financially emigrate. A
pension or provident fund, you can cash, pay the tax and take
overseas on your allowances, but cashing in a retirement annuity,
requires financial emigration,” explains Powell.
After successfully changing your status to non-resident you
will be able to encash your retirement savings before the age
of 55.
“If you have assets greater than the annual foreign allowances,
financially emigration allows you take everything out in one go,
so if you want to take out more than the allowance at once you
would need to financially emigrate. There used to be a levy on
financial emigration, so if you financially emigrated you would
pay a 10% levy, but this is gone.”
“Lastly, if you are already living overseas and inherit from an
estate in South Africa, and you don’t still have a South African
ID, you probably need to financially emigrate,” concludes
Powell.
The first step to financial emigration
Powell says that in order to change your status from permanent
resident (or resident living temporarily abroad) to non-resident
you must register your intentions with the South African
Reserve Bank (SARB).
“You will need to make sure your tax affairs are up to date
and in order before you submit your application forms and
supporting documents, and you may have to submit a tax
clearance application.”
“Once the application has been successfully processed, the
SARB will issue you with an exchange control number, and you
will be able to use a non-resident bank account to freely transfer
your funds abroad.”
SOURCE Sable International