As the cost of living continues to soar, many South Africans are considering emigration for financial reasons. With other countries offering stronger currencies, free healthcare and education, moving abroad has become an increasingly attractive option to over-extended South Africans looking to cut down on their expenses. This raises some tough questions: can you leave South Africa if you still have unpaid debt remaining in the country? Will your visa be denied because of debt? What are the financial implications of going overseas with unpaid debt?
To set your mind at ease, we will be answering some common questions on the topic of emigrating from South Africa with unpaid debt.
What happens if you have debt and leave South Africa?
Can you still leave the country if you have debt? You can still leave South Africa with debt, but you should not do so as a means to escape or abandon your debt. While your debt outstanding might not directly impact your travel plans, certain debts can have lasting consequences. For example, owing money to the South African Revenue Service could result in the attachment of your assets and if you hold assets located outside South Africa, these could potentially be repatriated to settle the debt.
Can a visa be denied because of debt?
It is unlikely that your visa will be denied if you have debt in South Africa. Unpaid debt falls within the realm of civil matters and is unrelated to the prerequisites for emigration. However, even though the South African government does not have a specific policy on debt and visas, it is important to bear in mind that visa officers may consider debt as a factor in their decision-making process, especially if they are concerned that you may not be able to support yourself financially while in the country. As such, to increase your chances of getting a visa, it is important to be honest about your debt on your visa application and to provide evidence that you are making regular payments on your debts.
Does your debt get wiped if you move abroad?
Moving abroad does not wipe your debts or relieve you of the obligation to settle the debts you left behind. Furthermore, moving overseas does not mean that your creditors will stop hounding you for payment. As long as the debt you owe remains, you will be liable in South Africa. As such, it is always in your best interest to pay your debts before leaving the country or be open with your creditors about why you’re moving abroad and how you plan to settle your debt from abroad.
Moving overseas with debt: two approaches
When it comes to emigrating from South Africa with debt, you have two choices.
1. Address your debt before you depart the country:
Your debt obligations in your home country persist until fully paid. If you move abroad and disregard your outstanding debt in South Africa, your creditor will perceive your actions as defaulting, which will result in penalties. These may attract substantial debt collector fees and interest will accumulate on the entire unpaid sum. In short, it will become a snowball rolling downhill.
2. Continue to make monthly payments:
If settling the debt before your departure isn’t feasible, maintaining regular monthly payments while residing abroad is an option and moving to a country with a stronger currency may help you to pay off your debt faster. However, be mindful of the costs incurred in transferring money back to South Africa. To lower the costs, you might want to make larger, less frequent payments to speed up your debt settlement.
Here are some things you can do to prepare for emigrating from South Africa with debt:
- Create a budget and make a plan to repay your debts. This will show your creditors that you are serious about repaying your debts, and it may make them more willing to work with you.
- Contact your creditors and let them know that you are planning to emigrate. Ask them if they are willing to work with you to create a repayment plan that you can afford.
- Consider consolidating your debts into a single loan. This can make it easier to manage your debts and repay them faster.
- Seek professional advice from a debt counsellor or financial advisor. They can help you to create a budget, negotiate with your creditors, and develop a plan to repay your debts.
Can you tax emigrate if you have debt?
Yes, but you will have to show how your debt will be settled, for example from local sources or by international transfer. However, if your outstanding debt is with the South African Revenue Service , obtaining a tax clearance certificate will not be possible. As such, you will not be able to complete the process of tax emigration without tax clearance, and you will not be allowed to transfer funds out of South Africa until your taxes are settled.
FinGlobal: cross-border financial specialists for South Africans abroad
Managing your financial affairs in two different countries can get complicated. FinGlobal is here to help. We can assist you with managing your tax compliance back home until you get settled abroad and you’re ready to cease tax residency in South Africa. We can also assist you with tax clearance and cashing in your retirement annuity when the time is right, and handle the international transfers on your behalf.
To see how our services can simplify your financial transition, leave your contact details below and we’ll be in touch to discuss your requirements. Alternatively, you can also send an email to firstname.lastname@example.org with all your financial and tax emigration questions.