Thanks to tax directive system updates from the South African Revenue Service (SARS), individuals who had formally emigrated through the South African Reserve Bank approval process before 1 March 2021 can now cash in their retirement annuities without having to complete the process of tax emigration, and they can skip the three-year waiting period. Let’s take a look at what you need to know about these changes in order to make use of them.

South African Retirement Annuity (RA) withdrawal rules

Generally speaking, the contents of your South African RA funds cannot be touched until you reach retirement age. Cashing in your retirement annuity early was usually only possible if you’d become ill or disabled, or you’d completed the process of formal emigration with approval of the South African Reserve Bank.

This changed in March 2021, and South Africans became eligible for early withdrawal of their retirement savings after having completed the process of tax emigration through SARS to become a tax non-resident, but only after they had maintained this non-resident position for three years, unbroken.

To access RA funds, individuals would need to follow RA fund rules for notifying the administrator of their intention to withdraw. Then, the fund administrator would need to submit a tax directive request to SARS. The purpose of a tax directive is to enable SARS to instruct the fund administrator or insurer on how to deduct tax from the lump sum cash payout.

Until earlier this year, the tax directive system included a validation that resulted in applications being rejected, where the reason noted was ‘emigration withdrawal’ but the date of accrual was listed as on or after 1 March 2022. As of July this year, this tax directive validation has been removed.

What does this mean for South Africans looking to withdraw their retirement annuities because they’ve emigrated?

It means that individuals who formally emigrated through the South African Reserve Bank approval process before 1 March 2021 can now withdraw the funds from RA products without having to additionally tax emigrate and then wait the three years before cashing in.

As such, the accrual date tax directive applications with the reason ‘emigration withdrawal’ can now be a date that falls on or after 1 March 2022 as long as the following supporting documents are provided with the tax directive application submitted through eFiling, in order to prevent rejection –

• The emigration application Form MP336(b) stamped by your bankbefore 1 March 2021; plus
• The letter issued by the Authorised Dealer (your bank) to indicate that the individual’s emigration was recognised for purposes of exchange control before 1 March 2022 (which is the SARB date of approval).

In addition to the above, the Tax Directive Guides now indicate that

The Fund Administrator must submit the tax directive application on the individual’s behalf through eFiling using Form B or Form C, along with the following supporting documentation:

• A letter from the Authorised Dealer to confirm that the emigration was recognised by SARB for purposes of exchange control, dated before 1 March 2022.
• A copy of the Tax Clearance Certificate (TCC) issued by SARS in respect of emigration; or
• A copy of the ‘Tax Compliance Status – PIN issued’; or
• An affidavit that explains why a TCC cannot be provided by SARS.
• A copy of the MP336(b) that has been stamped and signed by an Authorised Dealer / SARB, bearing a that is before 1 March 2021; and
• The certificate of residence obtained from the relevant Tax Authority of the country in which that individual now resides.

To ensure you’re properly informed on tax emigration from South Africa, non-residency, and withdrawing from your retirement annuity, you should read:

• The new SARS procedure on how to become a tax non-resident of South Africa
• What the FAQ? The FYI on cashing in your South African Retirement Annuity
• What documents do you need to submit with your Tax Compliance Status (TCS) in respect of emigration?

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