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Four Things You Need to Know About Formal Emigration from South Africa

By March 3, 2020December 27th, 2023Financial emigration

Four Things You Need to Know About Formal Emigration from South Africa

March 3, 2020

formal-emigration-from-south-africa

Formal emigration sounds like a big deal, right? Well, it is, but not for the reasons you’d think. Formal emigration from South Africa is not leaving the country dressed for a black-tie event. Formal emigration is simply a fancy way of saying “financial emigration” – it’s basically the descriptive equivalent of a tuxedo that refers to the process of letting the South African Reserve Bank (SARB) know that you have financially left the country on a permanent basis. For exchange control purposes, this then changes your status from resident to non-resident. Before we get ahead of ourselves, let’s unpack what it means for you, plus what you need to know before you do it, all while taking a look at how to formally emigrate from South Africa.

 

What is formal emigration from South Africa?

It is the process of formalising your financial exit from the Republic, notifying the SARB that you (and your finances) have left permanently and as such you should no longer be subject to the same exchange control rules as South African residents.

 

What do you need to know about formal emigration from South Africa?

It’s always best to know exactly what to expect, so you can weigh up the pros and cons of financial emigration yourself. Here are the four most important things to keep in mind throughout your reflection and planning.

 

1. Formal emigration is a personal choice. It’s not compulsory.

Every individual situation is going to be unique. This means there’s no cookie-cutter answer to the questions raised when considering how to formally emigrate from South Africa. As such, you’ll want to obtain impartial, expert advice on your personal circumstances if you’re considering financial emigration.

As mentioned, formal emigration is not compulsory if you’re a South African living and working overseas, or you have plans to do so in the future. There are still avenues open to you as a South African exchange control resident to move money abroad as the need arises.

 

2. Formal emigration doesn’t happen automatically.

Even if you’ve physically emigrated from South Africa, formal emigration doesn’t flow automatically as a result. It’s a formal process that must be initiated on application.

 

How to formally emigrate from South Africa:

The following steps are necessary in order to formally/financially emigrate from South Africa:

Step1: Bank application:

  • You must apply to SARB for formal emigration through your choice of South African banks.
  • Complete and submit a Form MP336(b), together with a Tax Clearance Certificate – Emigration, if applicable, to your bankers.
  • You will also have to submit any other documentation as required on Form MP336(b), which could include a copy of the permanent residence permit if you have been granted permanent residence abroad.

Step 2: Tax clearance application:

  • You will need to apply for and receive tax clearance from SARS.
  • Once you have this you can submit your financial emigration application to your bank to change your status to a non-resident.

Infographic on how to formally emigrate from South Africa:

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

Your status only changes from resident to non-resident once approval has been granted by the South African Reserve Bank and the South African Revenue Service. 

Read more about financial emigration here.

 

3. Formal emigration (aka financial emigration) does not change your tax residency.

Despite the necessity for approval from the South African Revenue Service (SARS) formalising your emigration for exchange control purposes does not have an impact on your tax residency status, nor your obligation to pay tax on your worldwide income (and South African sourced income) and submit a tax return to SARS. The only way to change your tax situation is to apply for an exit from the South African tax system.

Formal emigration from South Africa does not affect your citizenship, nor does it mean you have to give up your South African passport. You’ll always be welcome back in South Africa, no matter what. Once a Saffa, always a Saffa!

[Further reading: Tax emigration vs financial emigration: what’s the difference?]

 

4. Like everything in life, formal emigration from South Africa has pros and cons.

Whether the pros of formal emigration outweigh the cons, will depend on your personal circumstances and your reasons for pursuing financial emigration in the first place.

Some of the advantages of formal emigration include:

  • Once completed, financial emigration opens a free flow of capital, making it easy for you to access and transfer your South African funds abroad where you need them.
  • Formal emigration is one of the handful of exceptions to the rules that prevent you from cashing in your retirement annuity or pension savings before the age of 55.
  • If you’re expecting a South African inheritance in the future, getting your proceeds transferred abroad will be much easier if you’ve already financially emigrated, because no tax clearance will be required on your part.

In the interest of transparency and forewarning, there are some drawbacks to consider informal emigration from South Africa.

  • You will not be allowed to hold a credit card or a personal loan in the Republic, with the exception of a bond on a property or vehicle finance. So, you’ll have to settle your outstanding personal debts before finalising your formal emigration application.
  • You will trigger an exit charge (also known as capital gains tax) on all your assets, except for fixed property, at the time of your formal emigration. This is because you are deemed to have sold your assets on the day before you leave.

FinGlobal: Formal emigration experts for South African expats

Still got questions about how to deal with your formal emigration from South Africa? FinGlobal provides tailored, trusted financial emigration services for South Africans all over the world. We’re ready to help you decide whether formal emigration is your best move when it comes to planning your financial future to match your career moves and jet-set ambitions.

Why choose to partner with the experts on your formal emigration?

  • You’ll get professional advice to assess whether financial emigration is the right option for you.
  • We’ll handle all the paperwork and make sure all the supporting documentation is present before submitting to the various institutions to prevent delays.
  • We’ll coordinate the documentation flow to ensure the shortest possible turnaround time to completion.
  • You’ll receive expert assistance with complex exchange control matters along with the assurance of our full adherence to exchange control and tax authorities.
  • We’ll act as a tax agent on your behalf to engage with SARS while saving you the time and effort it would take to engage with South African institutions from outside the country.

What are you waiting for? Get started with your free, no-obligation assessment today. Leave your details and we’ll call you back.

 

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