I’m emigrating … where do I start? This process although very exciting is often daunting as there is so much to do and think about. Below are some practical tips on how to navigate your tax status, residency status and a few things inbetween.
SARS (South African Revenue Service) and the SARB (South African Reserve Bank)
The only thing that both of them are interested in is if you are still a South African Tax Resident.
Residency and Non Residency
Many people moving abroad automatically call themselves non resident purely because they no longer live in South Africa. The status though carries two parts
Physical residency – under this group you can put everything that falls under Home Affairs – such as temporary residency, citizenship, dual citizenship, visa’s etc.
Tax residency – this refers specifically to your status with SARS and the SARB. It affects your ability to apply for finance; open a bank account; take funds out of SA and the submission or not of an annual tax return.
In order to become a non-tax resident – you MUST get a letter from SARS indicating this status and keep that letter somewhere for easy access. There is a formal application process that one has to go through and it is beneficial to do this via a tax specialist.
Taxes paid when emigrating
There is no exit tax
There will be a deemed (whether you sell or don’t) disposal of all your South African assets (excluding your primary residence). This will generate CGT event.
Link between SARS and the SARB
They don’t automatically share information. It is therefore very important that when you cease to be a tax resident with SARS you advise the SARB yourself. If you don’t do this the SARB will still view you as a tax resident and this will impact your ability to take funds offshore.
Other financial institutions
Applying to SARS and the advising the SARB that you are no longer a tax resident does not mean that your bank, insurance house or asset manager knows your status. You have to inform them all about your change in status yourself and you do this by sending them the letter you get from SARS confirming your status.
Life insurance policies
If you have life insurance in SA – keep this in place until you have new life insurance abroad. You do need to advise the insurance house that you have left the country.
Your identity document
Keep your green bar-coded ID book or Smartcard in a safe place. This will come into play if you inherit from a South African resident – this includes inheritance from a South African Trust.
Your bank
- Advise your bank when you emigrate so that they can register you as a non resident. If you call in from abroad with an issue they will automatically refer you to their local branches and tell you to physically visit them. If you have advised them of your new status, when you call they will route you to the non-resident divisions who work online.
- If you keep your SA bank account open – get a Power of Attorney from them on their letterhead giving a trusted person authority to act on your behalf should there be an issue that has to be dealt with after you have left.
- Arrange for OTP’s to be sent to your email address rather than your cellphone.
Inheritance from a SA source
It would be better to have a SA bank account – resident or non-resident in order to receive funds. It is easier to open this bank account, get the inheritance paid into that bank account and then deal with SARS and SARB to get the funds offshore. A tax consultant will be able to assist with this process.
Advantages of remaining a tax resident when you live abroad
- You have access to the R1m discretionary allowance to take offshore without tax clearance
- You can keep your SA Bank account open – this would be beneficial if you inherited funds in SA as they could be paid directly into that bank account
- Receiving income from an annuity can be paid to your SA bank account and then transferred via exchange control abroad
Disadvantages of remaining a tax resident when you live abroad
- You will be required to submit an annual return to SARS whether you earn an income or not
- You will be taxed on your worldwide income. This can be offset against the tax regime you live in due to double taxation agreements – but the paperwork will need to be done
Why change your tax status
- It will affect your foreign earnings and assets. Your different status will determine the taxes applied.
- It will determine your ability to access your restricted retirement funds.
Retirement products
Not all funds are treated equally and need to be assessed. It is therefore important to chat to a financial advisor to guide you through this.
Most important note: Retirement funds cannot be transferred to similar products abroad
Pension/provident and retirement funds where no previous withdrawal has been made can be liquidated immediately with the corresponding tax consequences. Where a withdrawal has previously been made restrictions will apply.
Retirement annuities
There is a three year waiting period to liquidate these products. You have to have been out of the country (per your SARS letter mentioned above) for three years before you can access the cash
Living Annuities
If you already have a living annuity when you emigrate you can’t cash this in and take the funds. The income can be paid into your foreign bank account, but this can only be done annually. If you require a monthly income amount, it will have to go into a South African bank account.
Annuity income/rental income etc
Any income received once you have emigrated can be paid into a non-resident bank account. So if you are following the full emigration path – but are still going to be earning income in SA a non-resident bank account would be the best option.
A lot to think about – and it is worth contacting a professional to assist. If you need help, please contact me so that I can put you in touch with the right people.
