Financial emigration isn’t something most people understand. Once moving abroad, most expats spend their time assimilating into the new culture, learning new routes and trying to understand the new culture and language.

As an expat, you’ll also get to know the new banking system and other financial services rules and regulations. But it’s important to perk your ears if you still have financial assets left in South Africa – as there may be cause for you to consider financial emigration.

What is financial emigration?

Financial emigration simply means your status, according to regulatory authorities – the South African Revenue Service (SARS) and the South African Reserve Bank (SARB) – has changed from resident to non-resident.

You see, although you may have relocated abroad, your financial affairs remain “open” until the day you apply for financial emigration. Of course, this is not something many people are aware of, nor are they aware of the benefits of applying for financial emigration.

Transferring funds offshore

By South African law, expats are allowed to encash and transfer the proceeds of certain policies and retirement funds abroad. These transfers can be made using the annual allowances imposed by the regulator. These allowances are R10 million and R1 million respectively and are called the Foreign Investment Allowance (FIA) and Single Discretionary Allowance (SDA). If South Africans abroad wish to utilise the higher of the two – the FIA of R10 million – they will need to apply for tax clearance, which means your tax affairs will have to be in order if you wish to utilise this allowance.

There are, however, a few exceptions to the rule. Though you can transfer pension, provident and preservation funds offshore, you will not be able to transfer the proceeds of your retirement annuities or trust or inheritance income offshore without financial emigration. And should you be the beneficiary of an inheritance, you will have had to finalised your financial emigration before the date of the testator’s death.

The benefits of financial emigration

What frightens most people about financial emigration is the idea that it’s all so final.

Moving abroad is stressful enough – having to close another door to your home is something which many people find perplexing and nerve-wracking. After all, in applying for financial emigration you are essentially telling South African authorities that you’ll no longer be transacting in South Africa… or are you?

Thing is, financial emigration is not as limiting as some people believe. It does not prohibit you from moving funds to and from South Africa, nor does it affect your citizenship – it simply means you’re no longer a tax resident. Your funds will henceforth flow through a central account managed by a specialist banker who will oversee the fund transfers to and from South Africa. This bank account is called an Emigrant Capital Account and can be held with any of the major banks in South Africa – which means you can select the financial service provider of your choice.

And, as mentioned before, financial emigration will allow you to transfer the proceeds of your retirement annuity, trust and inheritance income abroad to use for whichever purpose you desire. That’s right! Had you still been living in South Africa, you will have been forced to reinvest your retirement savings, but once you’ve emigrated financially you now have the freedom to do with your money as you please.

Using your offshore transfers

Though you are now able to transfer these funds and use as a financial windfall, it may still be advisable to reinvest the funds, not only will this offer you the opportunity to earn interest in a stronger currency than the rand, but individuals residing in the UK stand to increase their pension due to the UK’s pension incentive scheme. And the best part? As you will pay withdrawal tax on encashing your annuity or fund, you will not be taxed again should you wish to return to South Africa at a later stage – your funds will be yours tax-free!

Should you not wish to reinvest, of course, you are free to use the money for any legal purpose your heart desires.

Should you apply for financial emigration?

In conclusion, you may want to consider financial emigration if you answer yes to any of these questions:

• Do you have retirement annuities in South Africa?
• Is there a likelihood that you’ll be the beneficiary of an estate or trust?
• Are you planning on staying abroad indefinitely?

If you think financial emigration may be on the cards, then why not leave your details and let finglobal.com help you out. We specialise in financial migration and can offer solutions which are fast, hassle-free and cost-effective.