Emigrating is a complex and emotional process. If you’re considering leaving South Africa to live and work abroad, you’ll need to understand the regulations around financial emigration, and how it differs from ‘normal’ emigration. Here are 10 key questions to consider before you transfer your finances overseas.
- What does financial emigration entail?
If you leave the country to live overseas without notifying the SA Reserve Bank, you will be subject to the same tax laws and financial regulations as if you were still living in South Africa. Financial emigration enables you to terminate your SARS tax residency status as well as your SARB residency status for exchange control purposes.
- What are the advantages of financial emigration?
It allows you to surrender your retirement annuity; access a South African inheritance; terminate your South African tax obligations with SARS and thereby avoid potential income tax from SARS on your foreign income. It’s an option that enables you to avoid paying double tax (in South Africa and in your new country of residence).
- Must I close my South African bank accounts?
Yes. Your funds will be held in an emigrant blocked rand account, which an authorised dealer will open for you as part of the emigration process. Your remaining assets, which you’ll declare on the MP336B form (Emigration: Application for foreign capital allowance), will then be managed via that account.
- What is a blocked rand account?
Get used to hearing this term. A blocked rand account is an exchange control vehicle through which all capital transfers out of South Africa must flow after your emigrant status has been recorded with the SARB. “You have viewing rights on that blocked rand account, but not transactional rights,” says Anthony Palmer, Group Commercial Director at Carrick Wealth. “Let’s say, for example, that you have a rental property in South Africa. That rental income has to go into the blocked account.”
Similarly, the monthly insurance on that rental property can also be paid as a debit order from that blocked rand account.
- Can I financially immigrate if I still have debt in South Africa?
Yes, but again your blocked rand account will come into play. If, for example, you have a South African home loan, the authorised dealer holding the bulk of the liability would manage that account, because they’ll have to file a monthly report with the SARB confirming that the bond is being paid.
- Will I have to transfer all my assets abroad?
No. Your assets can remain in South Africa, and any transaction debit orders can remain valid as before. So – to answer a common question – you won’t have to sell your house to conclude your financial emigration.
- What happens with those remaining assets?
They will be placed under control of the authorised dealer that finalises your emigration. This ensures that any capital accrued after your emigration date (as well as the proceeds of any assets subsequently sold) is credited to your blocked rand account.
- Do I need a tax clearance certificate to emigrate?
A SARS tax clearance certificate, which confirms that your tax affairs are in order, may be required depending on the number of years you have lived abroad. Bear in mind, though, that a tax clearance certificate is required to withdraw your retirement annuity – regardless of how long you’ve been living overseas.
- Will I keep my South African passport after I financially emigrate?
Yes. Financial emigration is facilitated through the SA Reserve Bank, which is an entirely different entity to Home Affairs. You’ll keep your green South African passport.
- Can I come back to South Africa?
You can visit home as often as you like; but if you immigrate you’ll have to record your return with the SARB in order to become a permanent South African resident again.
“Financial emigration may sound pretty daunting, but it doesn’t have to be,” says Palmer. “It usually takes up to three months and the key is to have a team that can lead you and hold your hand through the process. This is a huge emotional and financial decision, and it does need to be done correctly.”
Speak to Carrick Wealth about the best way to process your financial emigration, and find a solution that works for you and your family’s needs.