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The future expat files: Moving abroad and cashing in your South African retirement annuity

By May 10, 2021December 22nd, 2022FinGlobal

The future expat files: Moving abroad and cashing in your South African retirement annuity

May 10, 2021


The number of South Africans seeking international relocation opportunities is undeniably on the rise. There’s nothing quite like a global health pandemic to give you the perspective to reassess your life priorities, and come to the conclusion that life is too short not to pursue your dream of living abroad and seeking out better opportunities for your family. If you are in the process of mapping out your emigration from South Africa, finances will be a major consideration in your planning. Here’s what you’ll need to know about leaving South Africa and cashing in your retirement annuity once you’ve left.


Financial emigration from South Africa: no longer a thing in 2021

Recent amendments to South African tax law saw the concept of formal emigration being phased out. Before the changes, South Africans could have their emigration approved by the South African Reserve Bank. The outcome of this process was to have their status changed from resident to non-resident for exchange control purposes and this status change could then be used to trigger the early withdrawal benefit on retirement annuities before the age of 55. This allowed South Africans to effectively cash in their South African retirement annuities and move the proceeds abroad, in order to fund the next chapter of their lives in a new country.

In 2021, formal emigration (also known as financial emigration) through the South African Reserve Bank has been replaced with a simpler tax emigration process that is overseen by the South African Revenue Service (SARS). These changes have left expats all over the world confused as to what happens to their retirement annuities, if they can no longer formally emigrate through the Reserve Bank.

Long story short, South African expats can still cash in their retirement annuities before the age of 55 – the only thing that has changed is the manner in which this is achieved. Instead of lodging an application at the Reserve Bank to have your status changed from resident to non-resident for exchange control purposes, you will apply to SARS to have your status changed from resident to non-resident for tax purposes.


Tax emigration from South Africa

South African tax law was amended in 2020/2021 to modernise outdated exchange control rules. When it comes to relocating money out of South Africa, individuals will have to undertake a robust tax verification process as part of our new capital flow management system. This means that the process of tax emigration is now the key to accessing retirement savings early, and tax compliance will be necessary in order to move your money abroad. You will need to show your RA provider that you are no longer a tax resident of this country before they’ll start the process to withdraw your money, and then you will need to show SARS that you are in good standing with their tax authority, as well as provide proof of the source of the money that you wish to transfer abroad.


Read more about how to become a non-resident for tax purposes through tax emigration from South Africa.

When can you cash in your retirement annuity after tax emigration?

As mentioned, South Africans will need to complete the process of tax emigration in order to access the funds in their retirement savings, whether retirement annuity, pension preservation fund, provident preservation fund. Once they have had their status changed from resident to non-resident, they will need to maintain this status for at least three years before they will be allowed to apply to cash out their South African retirement annuities.

This means that if you will need to complete the process of tax emigration after you’ve left South Africa, and once this process is complete you will need to maintain your tax position for at least three years before you will be allowed to utilise your early withdrawal benefit on your retirement savings. However, once this time has passed, you will still be allowed to cash in your savings in full which you can then have transferred abroad after you’ve paid SARS their cut and dealt with any early encashment penalties or fees that your RA provider may require.


What are the tax implications of emigrating from South Africa?

When you cease to be a tax resident of South Africa, SARS takes one last opportunity to tax you before you leave. An exit charge becomes payable to SARS, under which you are deemed to have sold all your assets at market value the day before you ceased tax residency. This means that all your assets (except for immovable property in SA) are deemed to have been sold. Read more about Capital Gains Tax and tax emigration.


FinGlobal: tax emigration specialists

Still confused about how to handle your financial transition to a new country? Let FinGlobal handle it for you. We’re ready to work with you to develop your Personalised Financial Emigration Plan™ to get your money where it needs to be, handling your money moves in a tax compliant, time-efficient manner. FinGlobal is ready to assist with:

Leave us your contact details and we’ll be in touch to start your free, no-obligation personal financial emigration assessment.

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