South African expats often relocate abroad and spend many years living there before the issue of financial emigration raises its head. The reason for financial emigration from south africa
for many expats often revolves around the need to free up the flow of their capital from South Africa and ensure it is not subject to the exchange control allowances that South African residents have to adhere to.
A financial change in status, not a loss of citizenship
Financial emigration, also known as formal emigration simply concludes your financial affairs from a South African point of view. When you financially emigrate your status, for exchange control purposes with the South African Reserve Bank, changes from resident to non-resident. Financial emigration does not change your status as a South African. You and your family still have the right to South African citizenship and your South African passports.
Freedom from exchange control allowances
Once you have financially emigrated, you are no longer subject to the exchange control allowances that currently govern how much capital a South African can transfer out the country on an annual basis. The two allowances that a South African resident has access to include:
- A Standard Discretionary allowance of R1m
- A Foreign Investment Allowance of R10m (a personal tax clearance for allowance purposes is required for this).
There is also the option of a “special allowance” where you can request to transfer amounts above your annual allowances out of South Africa. This will be considered by SARS based on the merit of the application.
Access to your Retirement Annuity before you turn 55
When you financial emigrate you can cash in your South African retirement annuities even before you turn the age of 55 and move the money abroad. What’s more, your retirement annuity proceeds can be used for any purpose – whether you want to go on a worldwide cruise or buy a new home.
Quick financial access
Financial emigration means you are not limited by any exchange control restrictions and can freely transfer all your capital from South Africa to your new country including:
- South African source inheritance
- The proceeds of assets declared in your emigration application
- Passive income, i.e. rent, dividends, director’s fees, salary for services rendered in South Africa and income from discretionary or vesting trusts
All you have to do is contact the bank holding your capital account and simply arrange for the transfer of funds.
If you are planning on living abroad permanently, financial emigration makes sense from an administrative point of view. You won’t have multiple bank accounts to manage and can simply transfer your money from your capital account whenever you need it.
At FinGlobal, we have helped thousands of South Africans financially emigrate
abroad, and the majority of these have taken place retrospectively – after the expats have lived abroad for a few years. If you would like to know more about financial emigration and whether it is the right choice for you, contact us today.