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Emigration and Retirement Savings
By: Ilse de Klerk
Exciting times, you are emigrating!!
You want to pack your bags and off on a new adventure.
Well, there are some things that need to be done and decisions to be made.
Do you want to leave South Africa and never ever return?
Nothing to be left behind in South Africa.
Is there a possibility that you might want to return, at some point?
Factors that you need to consider, are SARS, Retirement Savings, and Annuities.
When you emigrate, you must not have any debts still in South Africa. SARS will look at your assets as if you are selling them ALL, and then apply CGT on those monetary values.
Retirement Savings
If you are younger than 55 years, then you can only have access to your funds after you have been living abroad for more than 3 years.
If your retirement savings in a particular fund is less than R247 500, then you can elect full withdrawal.
Any withdrawals from retirement funds will be taxed as per the applicable tax year.
Your fund within the fund is not taxed while being invested, and thus, you will be taxed when you withdraw from the fund.
Now the implication of emigrating and SARS.
If you are younger than 55 years, then you can not totally be a non-taxed resident, for you can only apply for a withdrawal after living abroad for 3 years and you do receive your annual tax benefits on retirement savings. You can not 'close' your tax number and e-filing profile for you need to declare your retirement savings withdrawal after 3 years of living abroad. You also still need to submit your annual tax return via e-fling.
Annuities
Income from retirement funds.
All annuities must be paid into a South African Bank Account and be declared to SARS. You can not 'close' your tax number and e-fling profile for you need to declare your South African earned income. You also still need to submit your annual tax return via e-filing.
Still emigrating
All your prep work is done, and you still want to fully emigrate from South Africa.
There is a SARS process to follow, first, you need to complete the Registration Amendments and Verification Form (RAV01) on e-filing. SARS will evaluate the form and then request documents to prove and state why you want to cease your tax residency. There is also a Physical Presence Test or Ordinary Residence test to be done for your application for a Double Tax Agreement.
When SARS approves your cessation of tax residency, PLEASE, keep those documents in a very safe place. Some of the documents that you must keep are:
♦ The letter from the Authorised Dealer to confirm the emigration was recognized
♦ The Tax Clearance Certificate
♦ The Tax Compliance Status - PIN issued
♦ Certificate of residence from the TAX Authority of the country in which you now reside.
Your South African bank account, status, also needs to be converted to a non-resident status. The banks can only do that with the aforementioned SARS documentation as confirmation. The same applies to investment, and policy providers to process any withdrawal requests.
If after you have gone through the emigration process and later you do want to return, you must apply for your tax residency and explain why you are coming back, for your motivation in your emigration that you will never ever return. You need to prove that your intent was not made fraudulently to avoid paying taxes.
Conclusion
You want to emigrate, and you will not return, ever and you are over 55 years.
Then yes, go through the process.
You want to emigrate, but you are younger than 55 years, with retirement funds in waiting.
Do not go through the full emigration process and apply for the Double Tax Agreement and continue to complete your annual tax return via e-filing for the 3-year time requirement. Then go through the full emigration process after the 3 years.
You are a bit uncertain and possibly do want to return for the grass wasn't 'greener' on the other side.
Do not go through the full emigration process and apply for the Double Tax Agreement and continue to complete your annual tax return via e-filing, See how it goes, and then go through the full emigration process.
I hope this information would assist you in making an informed decision.