Not so long ago, the term “Blocked Rand Account” was used when talking about the special account that was for asset allocation upon financial emigration from South Africa. A South African Reserve Bank construct, this special account is now more accurately described as a “Capital Account”. Why the change in name? Perhaps it was because “Blocked Rand Account” gave people the impression that their funds have been frozen, or their Rands blocked from leaving the country, when this is not the case at all. In these circumstances, “blocked” simply means “allocated for a specific purpose” – and this purpose is to enable the movement of assets and money from South Africa, once you’ve undergone the process of financial emigration. Let’s take a look at what’s involved in financially emigrating from South Africa, and what you can do with a Capital Account.
What else is a Blocked Rand Account known as?
- Capital Account
- Non-Resident Account
- Emigrant Capital Account
No matter which terminology is used, a Capital Account is the only conduit through which you will be able to seamlessly and legally transfer your South African funds to another country, because foreign exchange control restrictions have been applied to this account, to work in your favour.
What do you need to know about a Blocked Rand Account?
It’s not a transactional account and cannot be used for day-to-day transfers – it is purely for the use of moving an emigrant’s inheritance or pension funds from pension companies, or relocating the contents of a normal bank account.
Basically, once you’ve completed the process of formal emigration, a Blocked Rand Account becomes your only bank account back in South Africa, and all your funds will be transferred abroad from this account.
Who can apply for and use a Blocked Rand Account?
Because all capital transfers must happen through your Capital Account, it makes sense that you can only apply for one, once your emigration status has been recorded as changed from “Resident of South Africa” to “Non-Resident” for exchange control purposes.
What is financial emigration and why would you want to do it?
It’s not as much of a big deal as it sounds. Financial emigration is simply the mechanism by which it is possible to exit South Africa financially and change your status with the South African Reserve Bank from “resident” to “non-resident” for exchange control purposes. Nothing more, nothing less – you won’t have to give up your South African citizenship or throw away your South African passport.
All you’re doing is asking the Reserve Bank to view you differently while you’re abroad. You can still choose to come back to South Africa at any time you like.
As a financial emigrant, all your assets and capital will be brought together in one place – and this is the capital account/non-resident account. This account will be managed on your behalf by a financial emigration specialist at the bank that facilitated your financial emigration. From here, you can issue instructions for your bank to pay funds to an account anywhere in the world.
What are the benefits of financial emigration?
Once you’ve financially emigrated, you’re then free to move your funds from South Africa abroad. You’ll also have the freedom to enjoy a variety of other financial benefits, such as the ability to transfer offshore:
- The proceeds of your South African retirement annuity after tax, even before the age of 55.
- Your South African source inheritance and the proceeds of assets declared in your emigration application.
- Passive income such as 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 to which you are a beneficiary.
What are the steps and requirements for opening a Capital Account?
Step 1: Bank application and approval
- Apply to the South African Reserve Bank for financial emigration through one of the South African banks.
- If you’ve already lived outside of South Africa for more than five years, you can do this without a tax clearance, provided all your assets and remaining liabilities are declared on your application.
- However, if you’re making a retirement annuity withdrawal, you’ll need tax clearance, unless you’re retiring from a retirement annuity.
Step 2: Applying for tax clearance
- Where you’ve been outside of South Africa for under five years, you’ll need to get tax clearance from the South African Revenue Service (SARS).
- Once you’ve received your tax clearance from SARS, you can then submit your application to the Reserve Bank to have your status changed to non-resident.
Step 3: Final approval and assets withdrawal and withdrawing your assets
- Once you’ve received approval from the Reserve Bank on your financial emigration application, you’ll need to open a non-resident bank account (also known as a Blocked Rand Account) with the bank that handled your application.
- Once your funds have cleared into your non-resident account and your bank has completed the necessary exchange control checks, your funds can then be transferred abroad to your current country of residence.
How long does it take?
This entire financial emigration process can take between four and six months and depends on your unique situation.
What happens to your remaining South African assets?
Your remaining assets must be brought under the physical control of the bank that finalised your emigration to ensure that all capital accruing after the date of emigration and the proceeds of any asset subsequently disposed, will be credited to your Capital Account, where they must remain. These funds can be used locally for any purpose – such as property maintenance, spousal support, paying educational expenses for minor dependents, and so on.
If you wish to transfer your remaining liquid assets or you’re thinking of exporting your quoted/unquoted securities in lieu of cash, and the amount is in excess of the foreign capital allowance limits granted to emigrants, this decision is made on application to the Financial Surveillance Department of the South African Reserve Bank.
FinGlobal: The financial emigration specialists
So what exactly can we do for you? If you’re ready to start the next phase of your journey, we’re ready to help you with financial emigration from South Africa.
We can also assist with handling your retirement annuity capital surrender on your behalf, and we’ll even take care of opening your Blocked Rand Account, or converting your South African bank account into a non-resident account. If your tax matters give you sleepless nights, we’ve got all the tax expertise you could possibly need under one roof.