How to manage financial emigration: three steps for South Africans moving or living abroad

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By Lucy Smith*

The process of emigrating to a new country can be fraught with challenges. There is a lot to consider and do, including all the financial checks should you wish to move your money abroad with you.

Financial emigration, also known as formal emigration, opens up previously unavailable streams of capital to a person moving from one country to another. There are many good reasons to financially emigrate, not least of which is protecting your savings from unpredictable currency fluctuations. The major advantage of financial emigration is that it allows you to withdraw and transfer your retirement annuity safely offshore – even if you are below the age of 55. The actual procedure itself however, can be quite complex.

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Here are three steps to help you understand how to successfully emigrate your finances and ensure that your nest egg grows, rather than shrinks.

1) Make formal application to SARB and get tax clearance with SARS

If you’ve been out of South Africa for more than five years, then you can apply to the South African Reserve Bank (SARB) for financial emigration status through an authorised dealer (one of the South African banks) – without a tax clearance, making sure all your assets and remaining liabilities are declared.

Anything less than five years and you will need to get a tax clearance from the South African Revenue Services (SARS) first. This requires that you have an active tax number, and that all your affairs are in order.

With tax clearance in hand, you can then submit your application to SARB to change your status to non-resident. Don’t be concerned, this doesn’t mean relinquishing your South African passport: the change applies to your tax status not your citizenship.

2) Withdraw your assets

Once you have been approved by SARB for financial emigration, you can open a non-resident bank account with the authorised dealer who submitted your application to SARB. Proof of this account is needed for the withdrawal process. The authorised dealer will also ensure that all exchange control regulations are complied with.

africa-and-compassAt this point, you can now apply to your financial provider to withdraw your retirement annuity. This withdrawal is subject to tax and the financial provider will have to apply to SARS for a tax directive. SARS will approve the application and confirm the amount of tax to be deducted from your retirement annuity before withdrawal.

Your financial provider will also need to see proof of your SARS tax clearance, proof of your financial emigration being placed on record with SARB and evidence of your tax residency status of your new country of abode.

Once your financial provider has all the information and paperwork they need from you, as well as their tax directive from SARS, they will make payment into your non-resident bank account.

3) Transfer your funds offshore

Once your funds have reflected in your non-resident account, the authorised dealer will run their own check. As soon as they give the all-clear, you can transfer the released funds into your bank account in your new country of residence.

These funds can then be used as you wish – many of our clients for example, reinvest it in a scheme in their new country of residence or use it to buy property.

How long does the financial emigration process take?

airbus-159588_1280Estimated turnaround time, from submitting your documents to accessing your funds, is six months – barring any unforeseen circumstances of course. In our experience, the timeline goes as follows:

  • One to two months for you to complete the required paperwork and send all the documents through.
  • Two months for SARS and SARB to approve your tax clearance and financial emigration applications. If your tax affairs are not up to date, then this will take longer.
  • Two months to finalise the withdrawal of your funds.

Financial emigration is not a simple process; there are many rules, regulations and various institutional requirements to meet at every stage. That said, with the right support guiding the process, it’s not as complex as it seems. It’s advisable to contract the services of a credible provider, properly licensed by the South African Financial Services Board (FSB) and suitably qualified to advise on the many different and often complex factors, which may affect the outcome or decision to emigrate.

Such a provider would need to have good working relationships with SARS, SARB and a solid understanding of how the product providers in South Africa operate. Ultimately, for those South Africans already living abroad, or for those about to make the move, the benefits of financial emigration and freeing up your retirement funds are well worth the time and effort.