With financial emigration on the cards for so many South Africans living and working abroad, there are some things you need to know about life after financial emigration. Once you’ve emigrated financially and become a South African non-resident, your bank account will be converted to a Blocked Rand Account. Here’s what that means, and five things every future expat needs to know about non-resident bank accounts in South Africa.
1. Blocked Rand Account: Not as forbidding as it sounds.
It might sound like your money is in danger, but it’s not. It’s not blocked from leaving the country, it simply means that the account that your Rands are sitting in is “blocked off” for a specific purpose. A Blocked Rand Account is simply a South African Reserve Bank construct that allows for asset allocation after financial emigration from South Africa has taken place. In terms of exchange control regulations, it is the only means by which capital and assets can flow out of the country.
2. There are many other names for a Blocked Rand Account
Times have changed, and today such an account is more accurately described as an “Emigrant Capital Account”. This renaming was more than likely intended to eliminate the impression that the funds contained in a Blocked Rand Account have been frozen, or “blocked” from leaving South Africa.
What else is a Blocked Rand Account known as?
- Capital Account
- Non-Resident Bank Account
- Emigrant Capital Account
No matter what you call it, it’s still the only vehicle by which you can legally transfer your South African funds to another country because exchange control rules have been applied to this account so that it works in your favour.
3. Blocked Rand Account: Only financial emigrants (or non-residents) can apply and use
It’s not called an “Emigrant Capital Account” for nothing. All cross-border capital transfers must happen through this account, so you’ll only be able to apply for one once
the change in your residency status has been recorded with the South African Reserve Bank from “Resident of South Africa” to “Non-Resident” after you’ve completed the process of financial emigration.
What is financial emigration?
Financial emigration (also known as formal emigration) is another South African Reserve Bank construct, and it is simply the means by which you can exit South Africa financially. You do this by changing your status from “resident” to “non-resident” and this change is purely for exchange control purposes. It does not change your citizenship, except for the way the Reserve Bank applies exchange control regulations to your financial transactions.
Are there any benefits to financial emigration?
Financial emigration opens a free flow of capital out of South Africa for you. This means it’ll be easier for you to transfer offshore:
- Retirement annuity proceeds before the age of 55 (less tax of course)
- Proceeds of assets declared in emigration application
- South African source inheritance
- Passive income (rental, dividends, director’s fees)
- Income from discretionary or vesting trusts
- Third party life policy beneficiary proceeds
4. There’s a process to follow when opening a non-resident bank account in South Africa.
You have to do the bank application and get approval first.
- Make your application for financial emigration through your choice of South African banks.
- You can do this, without tax clearance, if you’ve lived outside the Republic for more than five years, so long as all assets and remaining liabilities are declared on your application.
- If you are making a retirement annuity withdrawal along with your financial emigration, you’ll need prior tax clearance.
Applying for tax clearance comes next.
- If you haven’t lived outside SA for more than five years, you’ll need a tax clearance from the South African Revenue Service (SARS).
- Once you have this, you can then submit your application to the Reserve Bank to have your status changed to non-resident.
SARB has the final say on approval, after which comes assets withdrawal.
- With your Reserve Bank approval in hand, giving you the nod to change from resident to non-resident, you’ll then be able to open a non-resident bank account with the bank that dealt with your application.
- After your funds have cleared in your Blocked Rand Account, all you have to do is wait for your bank to complete the necessary exchange control checks before you can instruct them to transfer your funds abroad to your current country of residence.
5. A Blocked Rand Account isn’t a transactional account.
It’s not going to be useful for day to day transactions and you won’t be able to transfer money into this account, because it’s purely for the use of transferring abroad the proceeds of assets declared in your emigration application. Any assets that are disposed of after the emigration will be credited to your Blocked Rand account, where it must remain. These funds can be used locally for any purpose.
Need help figuring out whether financial emigration is right for you?
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