If you’re one of the thousands of South Africans who has made the decision to jet off in search of better opportunities in another country, congratulations! It’s a big, brave choice that you’ve made, but now that you’ve made it…what’s next? It all might seem overwhelming to you, but if you break the process down into manageable chunks, this will reduce your stress levels greatly. Take it one step at a time, and you’ll eventually come through on the other side.

To give you some context on the financial logistics and tax implications involved with your emigration from South Africa, take a look at this scenario:

A South African couple, Jacques and Louisa, are counting down to their emigration date in one month. They’re married, they’re in their forties, and they have a number of questions on the topic of tax emigration.

What exactly is tax emigration? And is it mandatory?

Tax emigration is the process of changing your residency status from South African resident to non-resident, for tax purposes. This process is handled by the South African Revenue Service (SARS), and it involves making a declaration to the revenue authority that you no longer meet the requirements for tax residency in South Africa, and that you wish to have your tax status updated to non-resident as a result.

Tax emigration from South Africa is mandatory after you’ve permanently relocated.

Read more: Financial Emigration vs Tax Emigration in SA

What are the advantages and disadvantages of tax emigration?

Benefits of tax emigration:

• Streamline your tax obligations with SARS.
• Avoid paying tax in South Africa on your worldwide income.
• Only pay tax on South African income (e.g., rental income from property).
• Become eligible to cash in your retirement annuity after three years of being a non-resident for tax purposes.

Even after you complete tax emigration you can still:

• Own property in South Africa as a non-resident.
• Keep your South African passport and citizenship.
• Inherit money from South Africa.

Disadvantages of tax emigration:

• You may be subject to “exit tax” – Capital Gains Tax – on certain assets when ceasing your South African tax residency.
• You may lose access to certain South African tax benefits (e.g., medical expense deductions).

Read more:

• Considering tax emigration? Weigh up the advantages and disadvantages before deciding.
• Ticking the non-resident box was not enough, expats must confirm tax status with SARS urgently.

When can they start the tax emigration process, and when is the best time to begin?

Tax emigration can only be undertaken once Jacques and Louisa have permanently relocated from South Africa.

Read more: Breaking tax residency with SA: when to apply the physical presence or ordinary residence test.

What will happen to their property once the process is completed? Can they still earn rental income from their home?

Jacques and Louisa can still retain ownership of their South African properties if they so wish. There is no prohibition against non-residents owning property in South Africa. Furthermore, immovable property is not subject to exit tax upon tax emigration, but it will be subject to withholding tax when they eventually dispose of the property in the future.

They are free to rent out their property while overseas, but must bear in mind that rental income from their property will be subject to income tax in South Africa.

Read more:

• Tax matters: Non-resident tax when selling property in South Africa.
• Buying and selling South African property investments: tax implications for non-residents explained.

What will happen to their retirement annuities? What are the implications of the completed process?

Once Jacques and Louisa have ceased their South African tax residency and received their SARS Non-Resident Confirmation Letter, they become eligible to cash in their retirement annuities after three years.

After maintaining their non-resident status for three unbroken years, it is possible to access and withdraw the full value of their retirement annuities. There will be a tax event on withdrawal, but once this has been settled with SARS, they are free to transfer the proceeds abroad to use as they please.

Read more:

• Retirement annuity policy surrender in South Africa: 3 important things for expats to understand.
• The facts on emigration and withdrawing from your retirement annuity before and after 55.

What other steps should they take regarding the tax emigration process before leaving, and what actions should they take after they have left?

There is a checklist of things to consider, as well as 7 financial things you need to do before (and after) you leave South Africa permanently, including:

1. Knowing how much money you can take out of South Africa when emigrating.
2. Informing SARS that your details have changed because you have left the country, using the RAV01 form.
3. Bearing in mind that you will still have to submit a tax return in South Africa until you have completed tax emigration.
4. Preparing for Capital Gains Tax on your tax emigration, with these tips for minimising its impact.
5. Deregistering for income tax, if you no longer have any financial ties with South Africa.

FinGlobal: cross-border financial specialists for South Africans

Relocating your finances after emigration doesn’t have to be stressful. FinGlobal offers a full suite of services aimed at helping South Africans to make a smooth transition from one country to another. From tax emigration, to tax clearance, tax refunds, to retirement annuity withdrawals and international money transfers, FinGlobal provides secure, convenient online services to take the stress out of your money moves.

To find out more about FinGlobal’s services, please leave your contact details below and we’ll be in touch to see how we can help.