Are you a South African living abroad? Did you formalise your emigration with the South African Reserve Bank (SARB) before 1 March 2021? Do you still have assets remaining in South Africa? If you answered ‘yes’ to these questions, you’re probably feeling a little confused as to your next steps. What do you do now? How do you get your remaining funds out of South Africa? What is tax emigration and how does it affect you? Take a deep breath, it’s not as complicated or as ominous as it sounds. Let’s break it down, one step at a time.
SARB formal emigration vs SARS tax emigration: what’s the difference?
Formal emigration through SARB
If you left South Africa before 1 March 2021, you had the option to formalise your emigration with the SARB in order to change your status from ‘resident’ to ‘non-resident’ for exchange control purposes. The emigration process via SARB is also referred to as a SARB financial emigration. What this meant was that a different set of rules would apply to you when you wanted to move money out of South Africa.
To achieve non-resident status, you would have applied to the SARB and filled out a Form MP336(b), which was then submitted along with an emigration tax clearance certificate from the South African Revenue Service (SARS) in order to formalise your exit from South Africa.
Once your exchange control status was changed to non-resident, your South African bank account would be converted into a ‘Blocked Rand Account’ where your remaining cash would be kept. While this may sound like your money is being held hostage, this is not the case. A “Blocked Rand Account” is simply banking jargon for the fact that these types of accounts are ‘blocked out’ for specific purposes, i.e: to house the money of any emigrated South African.
Tax emigration through SARS
In an effort to modernise financial systems in South Africa, formal emigration has since been phased out, and the South African Reserve Bank is no longer the official conduit for emigrating South Africans to cut financial ties with their home country. Now, the South African Revenue Service must be approached by would-be emigrants.
What is tax emigration?
Tax emigration is the process that terminates your obligation to pay tax in South Africa on your income earned abroad. It is also now the only process through which you will be able to access your retirement annuity savings before the official retirement age of 55. This means that from 2021 onward, if you want to withdraw your retirement annuity before you retire, the only way to do so will be by ceasing your South African tax residency by means of tax emigration through SARS.
What’s different now?
- The emigration process has transitioned from formal emigration to tax emigration. SARB has moved to the sidelines, while SARS has now taken centre stage.
- The outcome is that the emigrant becomes a non-resident for tax purposes.
- Whereas formal emigration through SARB was voluntary, tax emigration is compulsory in order to cease tax residency in South Africa.
- Emigrants prior to March 2021 were able to immediately access their retirement annuity savings upon becoming a non-resident and are still able to do so. Emigrants post March 2021 will be required to complete a tax emigration from South Africa and wait three years before access can be granted to their retirement funds.
What must you do to get your money out of South Africa?
- Obtain tax clearance from SARS: This is a necessary step, regardless of whether you are ceasing tax residency now, or you previously completed formal emigration through SARB before 1 March 2021. This requires that all your tax affairs be in order, and once you have completed this step, you will be issued a tax compliance status (TCS) PIN from SARS. Only once you have this PIN will you be able to transfer money out of South Africa.
- Seek approval from SARB: Banks are required to seek approval from the SARB for emigrants who wish to transfer funds in excess of R10 million abroad. . Transfers for less than R10 million does not require SARB approval.
How much money can you move out of South Africa?
South Africans who have formally emigrated or those who have completed a tax emigration, can use the annual allowances available:
- Single Discretionary Allowance: Move up to R1 million in the year that you leave South Africa or when you ceased tax residency. Requirements: 18 years of age, acceptable identity document such as a green bar-coded ID book or Smartcard.
- Foreign Capital Allowance/Foreign Investment Allowance: Annual allowance of R10 million. Requirements: 18 years of age, TCS PIN from SARS, and acceptable identity document such as a green bar-coded ID book or a Smartcard.
Should you wish to move more money than the annual allowances permit, you will need to use the special allowance. While there is no limit to how much you can transfer using this allowance, you will need to seek approval from SARB and meet a stringent tax verification and risk test.
FinGlobal: cross-border financial solutions for South African expats
Still confused about what to do next? Let FinGlobal deal with the red-tape. We’ll complete every step of the process on your behalf, making it straightforward and hassle-free to move your money out of South Africa.
To get started, leave your contact details below and we’ll be in touch to discuss your options.