While South African citizens temporarily working overseas are still subject to South African tax laws, individuals who wish to permanently emigrate to a new country need to ensure that they follow the correct steps to enable them to take their savings with them and avoid running up against unnecessary tax problems down the line.
Individuals who emigrate to new tax jurisdictions could face problems in withdrawing their retirement annuities (RA) if they wait too long before getting their tax affairs in order.
One of the main problems is that withdrawing your RA requires up-to-date tax returns to be submitted. If you have not applied to the South African Reserve Bank to no longer be considered as a South African resident for exchange control purposes prior to emigration, and you subsequently do not file South African tax returns for a number of years after emigrating, gaining access to your South African RA may prove difficult.
In addition, South Africans under the age of 55 (unless the RA is worth R7,000 or less) will not be able to withdraw funds from their RA unless they formally emigrate. If you do not formally emigrate and leave your RA in South Africa, by only bringing it to your new country when you retire, there is a good chance that this asset would also have devalued significantly due to a potentially weaker rand in the future.
Another common reason for South African citizens to consider formally emigrating is when they have received a large inheritance in South Africa, as they may have issues getting the inheritance out of the country unless they formally emigrate.
What to do?
It is vital for all South African citizens thinking about emigrating, to get all of their tax affairs in order as quickly and efficiently as possible.
The following steps are crucial:
- Ensure that your South African tax returns are up to date;
- Apply to SARS for an emigration tax clearance certificate; and
- Apply to the South African Reserve Bank to formally emigrate.
The first two steps can be carried out by a tax advisor, but the third step must be handled by a South African bank.
Individuals who choose to not leave the country permanently, need to still make it a priority to file their tax returns. If tax returns are not filed while you live and work abroad, it may prove to be very difficult to get your South African tax affairs in order when you do decide to become a permanent resident in a foreign country.
To avoid any issues or delays when you plan to formally emigrate, it is advisable to get your tax affairs in order sooner rather than later.