If you’ve been researching your options in terms of financial emigration, it’s likely that you’ll have come across the term “Blocked Rand Account,” on your internet travels. You probably have a lot of questions about it too: what exactly is a Blocked Rand Account, and why would you need one if you’re a South African looking to emigrate financially and move your life and finances abroad?

We’ve got all the answers to all those burning questions right here, so read on!

 

What is a Blocked Rand Account?

While “Blocked Rand Account” might sound ominous, it’s not. It’s simply an institutional vehicle put in place by the South African Reserve Bank that is used for asset allocation after financial emigration from South Africa has taken place. Today, this kind of account is more accurately described as a “Emigrant Capital Account”, which eliminates the impression that the funds contained in a Blocked Rand Account have been frozen, or “blocked” from leaving South Africa. This is not the case. Here’, “blocked” simply means “blocked out for a specific purpose” and is a synonym for “designated” in this context. In other words, this account is designated for the specific purpose of moving assets and money from South Africa, post financial emigration.

Let’s take a look at what’s involved in financially emigrating from South Africa, and what you can do with a Emigrant Capital Account.

 

What else do people call a Blocked Rand Account?

• Capital Account
• Non-Resident Bank Account
• Emigrant Capital Account

A rose by any other name smells just as sweet and no matter what name is used to refer to this account, it is the only means by which you can legally transfer South African funds to another country. One of the other perks of this account? Exchange control rules have been applied to make it work in your favour.

 

What do you need to know about how a Blocked Rand Account works?

Can you transfer money to a Blocked Rand Account? This account cannot be used for everyday transfers, because it is not a transactional account. Its sole purpose is to facilitate the movement of an emigrant’s pension or inheritance funds, or the relocation of funds contained in a regular bank account.

Why is it also called a non-resident bank account?  Once you’ve completed the process of financial emigration – in other words, you’ve formalised your emigration, you become a non-resident of South Africa for foreign exchange purposes, and the only account you’re eligible to hold is a Blocked Rand Account. This becomes your only bank account in South Africa and the only means by which you can transfer money from back home abroad.

 

Who can use a Blocked Rand Account?

You can only apply for and use a Capital Account when you’re a non-resident. This means that you first have to change your emigration status from “Resident of South Africa” to “Non-Resident” for exchange control purposes. In other words, you have to complete the process of financial emigration before you can have and use a Blocked Rand Account.

 

What is financial emigration and why would you want to do it?

Financial emigration (also know as “formal” emigration) is exactly as it sounds. It’s the relocation of your finances and is simply the means by which you declare your exit from South Africa and change your status with the South African Reserve Bank from “resident” to “non-resident” for exchange control purposes. All it does is tell the Reserve Bank that they should change the way they view you, and they should no longer apply the same exchange control rules to your money, as they would if you remained a resident.

Financial emigration does not require you to give up your South African citizenship or hand in your Green Mamba passport. Nor will you be required to stop supporting the Springboks, and you’ll always be welcome back to South Africa any time you’d like to return. You’re still as South African as always, you’re simply instructing the Reserve Bank to look at your financial moves differently while you’re living abroad.

 

What are the benefits of financial emigration?

Once you’ve financially emigrated, you establish a free flow of capital out of the country and you’re then able to move your funds to where you need them. You’ll also gain a variety of other benefits, including the ability to move offshore (through your Blocked Rand Account, of course): 

• The proceeds of your South African retirement annuity after tax before the official retirement age.
• The proceeds of assets declared in your emigration application and your South African source inheritance.
• The passive income you receive, such as rent, dividends, director’s fees, salaries for services rendered in South Africa and income from discretionary or vesting trusts.
• The proceeds from a third-party life policy that names you as a beneficiary.

Once you become a financial emigrant and accordingly a non-resident, all of your assets and capital will be brought together in one location – this being your capital account/non-resident account. It is managed on your behalf by a financial emigration specialist at the bank that facilitated your financial emigration application.

 

Want to learn more about the step-by-step process of opening a Emigrant Capital Account? Read here.

 

FinGlobal: Cross-border financial specialists

Financial emigration can get complicated. There is a massive amount of paperwork involved, many official financial institutions (the South African Revenue Service and the Reserve Bank, not to mention insurance companies and your bank of choice) to coordinate with, and it can be stressful if you don’t know what to expect.

That’s why we’ve made it our priority to give South Africans the reliable, impartial, expert advice they need to make big financial decisions. We’re perfectly positioned to help South Africans all over the world with our full suite of financial services for expats, including financial emigration, retirement annuity withdrawal, tax clearance, exiting the South African tax system and foreign exchange. We’ll walk you through every process, every step of the way, ensuring that each transaction has the best possible outcome for your financial future.

Ready to discuss Blocked Rand Accounts and all the finer details of financial emigration?