Over the last couple of years, you’ve slowly been saving to move abroad. You’ve learned a new language, and mapped out all the places you plan to see. But should you take all your wealth with you?
We have a look at what financial emigration is, we outline the new requirements SARS has set out, and we have a look at how this impacts your retirement savings.
Tip: Don’t leave the country before you’ve sorted out your debt. Start debt consolidation today.
What is financial emigration?
Traditionally, financial emigration was the process of formally moving your funds abroad. This was usually done so that you could align your finances with the relevant tax authorities in your new home country.
However, according to Bobby Wessels, associate at AJM Tax, the concept of financial emigration is an outdated process.
“Since 1 March 2021 the concept of financial emigration has been done away with. Only those who have applied for financial emigration prior to that date would be able to financially emigrate,” says Wessels.
“However, if you plan to permanently move abroad, there are new processes that can be followed. These are largely governed by the South African Revenue Service (SARS), in order to ensure that you are allowed to move your funds abroad,” he explains.
The new legislation puts a lot more focus on residency in regards to taxes, and you will have to carefully consider the South African Residency Tests if you intend to emigrate, or you’ve already emigrated.
You also need to apply for an Emigration Tax Clearance Certificate. This should include supporting documents that will prove your non-resident status.
Furthermore, you will have to pay an exit tax based on your overall assets, and you will undergo an audit by SARS before receiving final approval.
READ MORE: How much money do you need to move abroad?
An important consideration: Your retirement
Elena Bevilacqua, certified financial planner at Fiscal Private Client Services, says an estimated 91,000 residents left South Africa between 2016 and 2020, according to Stats SA.
“Emigration requires a number of financial considerations including – but not limited to – ensuring that your tax affairs are in order,” says Bevilacqua.
“Recent amendments to regulations regarding emigration specify that if a retirement fund member can prove that they have been living abroad for three years or more, they may access their retirement savings,” says Bevilacqua.
She says that this makes the process easier for people who left the country some time ago. However, it doesn’t benefit those who haven’t moved yet.
“Retirement savings are intended to be used for retirement, and due to the costs of emigration, many people end up using their retirement savings to cover these costs. The three-year access restriction would limit the use of these savings for other expenses,” says Bevilacqua.
She strongly advises that you seek financial and tax advice, and that your investment framework is structured with your own personal goals in mind.