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Many people get confused about the financial emigration journey and what it actually entails. Very simply, the financial emigration journey involves changing your financial status from South African resident to ‘non-resident with the South African Reserve Bank (SARB). This does not mean you lose your South African citizenship or your passport and does not affect your right to reside in South Africa. As we like to say, “Once a South African, always a South African!” The financial emigration process concludes your financial affairs in South Africa – and can take place when you leave South Africa, or once you are living abroad.

 

 

The three steps to the financial emigration journey

  1. Bank application and approval

The first thing you need to do is apply to the South African Reserve Bank for financial emigration through one of the South African banks. If you have been living outside South Africa for more than five years, you can do this without a tax clearance, provided all your assets and remaining liabilities are declared.

  1. Applying for tax clearance

If you have been residing outside South Africa for less than five years, you will require a tax clearance from the South African Revenue Service (SARS). Once you have applied to SARS and receive your tax clearance, you can submit your application to the SARB to change your status to non-resident.

  1. Final approval and withdrawing your assets

Once SARB has approved your financial emigration status, you need to open a non-resident bank account with the bank that submitted your application to SARB. Once your funds have been reflected in your non-resident account, and your bank has run the necessary checks, they will give the all clear and your funds will be released in the bank account of your country of residence.

 

This entire process can take between four and six months and depends on your unique situation and the status of all parties involved.
 

 

Three frequently asked questions about financial emigration

Question: Why consider financial emigration?
Answer: Financial Emigration enables the free flow of your funds from South Africa and also brings with it a number of substantial financial benefits. As a financial emigrant you may transfer offshore:

 

  • The proceeds of your South African retirement annuity, even before age 55. This can be used for any purpose in your new country including buying property – or travelling around the world!
  • 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
  • Proceeds from a third party life policy
Question: Does financial emigration change your tax status?
Answer: Financial emigration does not determine your tax residency. Instead, your tax residency is determined in most instances by double taxation agreements (DTAs) that exist between South Africa and other countries. These DTAs determine which country has the first right to tax you, which then establishes your tax residency.
If you are a tax resident in South Africa, you must declare your worldwide income and capital gains to the South African Revenue Service (SARS).

 

Question: Is financial emigration the only way to transfer money offshore?
Answer: No. Every South African over the age of 18 has two allowances they can use to transfer funds from South Africa abroad:

 

  1. Single Discretionary Allowance

As a resident, you may transfer a total of R1 000 000 from SA every calendar year. Please note that all card transactions while you are abroad are included under this allowance.

 

 

  • Foreign Investment Allowance

As a resident, you may also use this allowance to transfer R10 000 000 abroad per calendar year. A tax clearance is required from SARS. This tax clearance is associated with the Foreign Investment Allowance and differs from a normal ‘good standing’ tax clearance.

This means that cumulatively between spouses you are allowed to remit R22 million offshore on an annual basis. You can even transfer larger amounts offshore, however it can take up to six months to obtain approvals from SARS and SARB.

 

Consult an expert to help you navigate the financial emigration journey

Financial emigration from South Africa is a complicated process, especially if you are attempting it from abroad. Everyone’s situation is unique and before you embark on the process it is best to talk to an expert to establish whether it is the right financial decision for you. FinGlobal has successfully assisted thousands of clients with a 100% success rate. For more information and a free consultation about the financial emigration process, contact us today.

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