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You’re never too old for a fresh start, and what better time to start a new life chapter than in your golden years? As you plan to start your retirement, you’re going to want to look for the best ways to stay healthy, active and engaged in order to enjoy your newfound freedom. One of the most effective ways to shake it up is to retire in another country. While this may not be an ideal choice for everyone – especially those with mobility or ongoing health issues – many people find the prospect of retiring abroad invigorating. If you’re one of these people, or you’d just like to live vicariously for a few minutes, here’s what you need to know about emigrating from South Africa at this stage in your life.

Retirement annuity withdrawals rules in South Africa 2021

1. The earliest that most RAs provide for withdrawal is the age of 55. Unfortunately, once you have reached the age of 55 you can no longer withdraw your savings in full. At this point in your life you will only be allowed to withdraw one third of your fund amount in cash, leaving you with an obligation to use the remaining two-thirds to purchase a living annuity that will provide an income (also known as a pension) for your retirement years.

2. It’s not compulsory to take the one-third lump sum withdrawal, so you can purchase a living annuity with your full retirement annuity amount. In so doing, you can effectively convert your retirement annuity into a living annuity.

  • Your annuity income will be paid out in South Africa. Depending on the frequency and amount you’ve chosen, which in turn depends on what kind of annuity you’ve chosen, you will need to have this pension converted from Rands and transferred abroad once you’ve emigrated. It is advisable to set this as a single annual payout, in order to minimise the associated costs of moving your money abroad, instead of having multiple payouts per year with multiple transaction fees.

3. If you do choose to take the one-third lump sum cashout option on retirement, you’ll be taxed according to the special retirement fund lump sum benefit table.

  • As it stands, the first R500 000 is tax free.
  • Thereafter, a fixed, banded tax table applying to amounts over R500 000.

Here’s what you need to know about retirement and tax, from SARS. Annuity income is taxable and with every payment you receive from your annuity, SARS will expect their cut.

Tax implications of emigrating from South Africa

4. You’ll need to submit a tax return for as long as you receive a taxable income. If you’re over the age of 55 and you’re intending to emigrate, please note that you’ll still have to submit annual returns to SARS and pay tax on your worldwide and pension income for the rest of your life. With the right tax advice, however, it is possible to reduce or eliminate your tax obligation, but only if the correct processes are followed.

5. Your avenues for tax relief depend on whether you intend to leave South Africa permanently or temporarily. Here’s what you need to know about how expat tax rules affect you, over the age of 55:

  • The expat/foreign income exemption only applies to employees. So if you were thinking of using this exemption, pension, business, or investment income does not qualify.
  • Retiring to a country with a clear Double Tax Agreement with South Africa could be used in your favour, with the correct tax guidance. Still, you’ll need to submit tax returns in both countries.
  • If you choose to exit permanently, you can pursue tax emigration with SARS If you meet the requirements for non-residency for tax purposes and your tax affairs are in order. This can terminate your tax obligation to South Africa in respect of your foreign income and foreign assets, but you will still be taxed on your annuity income.

FinGlobal: expat tax experts

Tax can get complicated, especially when your finances are operating in two tax jurisdictions. Are you paying too much tax? Are you paying tax twice when you shouldn’t be? Are you due a tax refund? If any of these questions has you uncertain, it’s best to bring in the tax experts to handle your cross-border financial portfolio.

When you choose FinGlobal as your financial services partner for your retirement, you can rest assured that we promise (and deliver!):

  • Ultimate speed and convenience: we handle all the paperwork for you, which results in faster payouts and less stress. Track our progress online.
  • Transparent fees, no upfront payment required: we’re so confident in our abilities to deliver on our promises, that you only need to pay us upon successful completion of our services. Our fees are fixed and disclosed upfront so you’ll never be stuck with any nasty surprise bills.
  • Compliance and security, guaranteed: We have all the right credentials in place to ensure every transaction is safe and secure, and completely above board.
  • Full house expertise: Our team provides reliable guidance in all aspects of cross-border finance, and they’re always ready to tackle your questions. 
  • Convenient digital service: All of our services can be rendered remotely online. Track our progress at every step.
  • Value for money: In addition to our long-standing 100% success rate, we provide highly competitive exchange rates, tailored advice, and convenience to ensure that you always walk away feeling like it was money well spent.

So what are you waiting for? Leave your contact details and we’ll be in touch soon to discuss how best to facilitate your emigration from South Africa.