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Financial emigration is a big decision with big consequences, but how do you know if it’s right for you? It’s also an extremely personal decision, that depends on a variety of factors that are unique to your specific situation so if financial emigration is something you find yourself pondering these days, here’s some food for thought for your brain to chew on. If you’re a South African living abroad, or you’re a South African planning a move abroad, it’s a choice you’re going to have to face at some point: should I emigrate financially or not?

What does financial emigration mean?

Just because you’ve packed up your house, family and pets and you’re now living in another country thousands of miles away from South Africa doesn’t mean you’ve financially emigrated. Not to be confused with physical emigration (and even though it’s also known as “formal emigration”) financial emigration is not an automatic process, although it is necessary for you to have left South Africa in order to get the ball rolling on your financial emigration application.

Financial emigration is the process by which South African expats now living abroad notify the South African Reserve Bank of their change of status from “resident” to “non-resident” for exchange control purposes. Why is this a big deal? The difference between resident and non-resident is in how SARB views you when you intend to move money outside of South Africa – if you’re a resident of South Africa, you’re subject to exchange control limitations and may only move a certain amount of money offshore per calendar year, provided that all the applicable foreign exchange and tax requirements have been satisfied.

[Here’s what you need to know about the exchange control limitations – the foreign investment allowance and single discretionary allowance, and how much money you can move out of South Africa.]

If you’re a non-resident, the South African Reserve Bank has no hold over you and you’re free to move your capital abroad as you see fit.

Why is financial emigration important if you’ve already physically emigrated from South Africa?

If you were wondering if financial emigration was possible even if you left South Africa a number of years ago, the answer is yes, it’s still a big possibility for you. The purpose of financial emigration is to conclude your South African financial affairs for emigration purposes. In so doing, you will be required to declare all your assets to SARB along with seeking their approval to transfer your assets to another country.

Once your financial emigration is approved, you can transfer your assets from South Africa any time you want, without any additional exchange control approval. Financial emigration can happen at any time, but it generally takes place retrospectively, as most South African expats will have left the country without recording their financial emigration at the time of their physical emigration from South Africa.

Does financial emigration change my South African tax residency?

Very long story short: financial emigration will not affect your relationship with SARS. Why is this? There’s a big difference between financial emigration and tax emigration and tax residency does not depend on (nor is it affected by) your decision to emigrate financially. In most cases, your tax residency will be established in your new home country. Depending on various double taxation agreements (DTA) between South Africa and other countries, you may still be taxed on income from assets in South Africa.

Each DTA differs from country to country, so checking with the tax office in your new home is advisable. You’ll also want to be aware of changes coming (effective 1 March 2020) to the income tax rules that apply to South African expats earning a foreign income abroad.

How do I go about financially emigrating from South Africa?

Take a look at this visual representation of the steps involved in financial emigration to change your status – for exchange control purposes – from South African resident to non-resident.

financially-emigrating-from-south-africa-process
Financial emigration process explained

What are the advantages of financial emigration? When should I be considering it?

Financial emigration makes sense if you’re looking to protect your savings and investments from the volatility of the Rand. This includes your retirement annuity or pension or provident fund savings, as emigrating financially is one of the only ways to get your hands on this money before the official retirement age of 55. Best of all? The proceeds of your retirement savings can be used for any purpose, and because you’ve emigrated financially you’ll benefit from a free flow of capital making it easier for you to transfer your money abroad. You’ll also enjoy much simpler remittance of any South African source inheritance abroad, along with any passive income, like rent, dividends, director’s fees and the proceeds of any assets declared in your emigration application.

Financial emigration: a few cautionary words

As with everything in life, there are some things you’re going to want to be aware of in weighing up your options when faced with the decision to emigrate financially or not.

  • Before you start the financial emigration process, you’ll need to be sure that your South African tax affairs are up to date.
  • This means you’ll need a tax clearance certificate from the South African Revenue Service (SARS).
  • Once your status has changed from resident to non-resident – for exchange control purposes – your South African bank account will be converted to an emigrant’s capital account (previously known as a blocked account), which is subject to South African exchange control rules.
  • Your bank will administer the remainder of your assets in South Africa, in accordance with South African exchange control regulations. There are Capital Gains Tax implications to financial emigration that you’re going to want to be aware of from the outset.

FinGlobal: Financial emigration specialists

Choosing a partner to handle your financial emigration is a big deal.  We know that every client has a story as unique as their circumstances, and every financial solution we recommend needs to be specifically tailored to your specific situation.

We’ve already helped more than 60 000 clients in 105 countries across the globe with various aspects of their cross-border financial portfolios, and we’re ready to do the same for you.

Why should you choose FinGlobal? While we could give you a long list of very convincing reasons, why should you take our word for it? Take a look at our client testimonials to see how we make a difference for expats all over the world.

If you’d like to know more about your options around financial emigration, contact us for your FREE and No obligation consultation and quote!