Leaving South Africa? Don’t let tax headaches derail your dreams! Figuring out your tax residency outside of South Africa and navigating things like international money transfers can feel a bit overwhelming. You don’t want to get caught out by unexpected tax bills, especially when you’re already juggling so much.

To help smooth your transition, our guide will help you understand the complexities of expatriate taxation, including capital gains tax in South Africa and how your emigration affects your South African retirement annuity. We’ll walk you through what you need to know to make informed decisions that will help you protect your hard-earned money.

Setting the scene – handling the relocation of your finances

We all want to protect our hard-earned money from the clutches of the taxman, right? But when you’re emigrating from South Africa, it’s not as simple as packing your bags and saying goodbye to the South African Revenue Service (SARS). There’s a lot more involved, unfortunately.

Ceasing your tax residency (tax emigration) in South Africa is a big decision. Tax emigration means essentially telling SARS, “I’m moving on, but I want to make sure I’m handling my taxes correctly.” This can be a stressful time, especially when you’re already dealing with the excitement and uncertainty of a big move.

Questions about your investments, properties, and even your insurance policies can start to swirl around in your head at this point. Will I have to pay capital gains tax in South Africa when I leave? What is the tax situation for expats in South Africa? What will happen to my South African retirement annuity? These aren’t always easy questions to answer, as the rules can be complex and will depend on your individual circumstances.

Read more: How are residents and non-residents taxed in South Africa?

Moving money offshore after ceasing tax residency: understanding the difference between capital and income

When mapping out how you’re going to move your money out of South Africa as a tax non-resident, it’s essential to understand the difference between capital and income. This distinction is key to understanding how South African tax laws and exchange control regulations will affect you.

• Capital: Generally refers to assets like property, investments, and lump-sum withdrawals from retirement funds.
• Income: Includes earnings such as rental income, dividends, and interest.

The South African Revenue Service (SARS) and the South African Reserve Bank (SARB) treat these sources differently when it comes to taxing them and how you are allowed to move them out of the country.

It’s also important to remember that SARS will look deeply into the source and compliance of your funds before letting you make international transfers out of South Africa.

As such, it’s vital to ensure all funds are properly declared and legitimately sourced for a smooth tax emigration process. Misclassifying your assets can lead to delays, audits, or even rejection of your application to cease tax residency, all of which will only add unnecessary stress to your move.

Read more: What happens to your South African insurance policies when you move abroad?

Offshore transfers from South Africa: capital vs income funds

Understanding the difference between capital and income funds is key to jumping through the right exchange control regulation hoops.

Capital funds: These typically involve larger sums, such as proceeds from property sales or lump-sum withdrawals from retirement funds.

• While you are a South African tax resident, you can utilise the Single Discretionary Allowance to transfer up to R1 million per year in capital funds without specific approval. An additional R1 million may be available in the year you cease tax residency with South Africa.
• Larger capital transfers usually require tax clearance and approvals from the South African Reserve Bank (SARB) through the SARS AIT application which requires a valid Tax Compliance Status (TCS) PIN.
• You have the flexibility to retain any capital assets in South Africa, such as property, and transfer them at a later stage.
• Importantly, once you cease tax residency, the Single Discretionary Allowance is no longer available. All capital offshore transfers will require a AIT TCS Pin from SARS

Income funds: These include earnings like rental income, dividends, and interest.

• After ceasing tax residency in South Africa, you can generally transfer income funds more freely.
• However, while you are still a tax resident, specific exchange control allowances will apply.
• Maintaining annual tax compliance checks with the South African Revenue Service (SARS) remains essential, particularly if you continue to hold assets in South Africa.

Read more: Understanding the limits of transferring money out of South Africa: The Single Discretionary Allowance vs the Foreign Capital Allowance.

Important things to keep in mind for international money transfers from SA:

• For trust distributions, tax non-residents will require an AIT TCS Pin when transferring capital distributions and a Good Standing TCS Pin for Income Distributions
• Inheritances received after you become a non-resident for tax purposes and the estate has been finalised can generally be transferred freely. However, if the inheritance exceeds R10 million, additional steps may be required.
• For non-residents, all capital offshore transfers require a SARS Approval – International Transfer (AIT) tax compliance status (TCS) PIN, and income transfers require a Good Standing TCS Pin

Read more: Ceasing South African tax residency – what happens to your assets afterward?

What happens to your South African retirement annuity and pension products when emigrating?

In 2021 the withdrawal of retirement annuities and pension funds after emigration became a little more complicated. Where previously emigrants could cash in their retirement annuity immediately after completing financial emigration through SARB, now legislation requires that individuals must complete tax emigration through SARS and must remain non-residents for at least three consecutive years thereafter before being allowed to access these funds.

Read more: What to know before transferring policy proceeds and cash from South Africa.

International money transfers from South Africa – inheritance funds

If you inherit money while living outside of South Africa, you generally have some flexibility in transferring those funds abroad.

• If the inheritance amount is below R10 million and you are no longer a tax resident with SARS (i.e: you are a tax non-resident), you can typically transfer the funds offshore without obtaining a tax clearance from SARS.
• For inheritances greater than R10 million, or if you are still registered for tax with SARS, you will need to obtain a “Manual Letter of Compliance” from SARS. This document is required for transferring:
  – Inheritances exceeding R10 million.
  – Life insurance policy payouts (excluding lump sums from retirement annuities, provident funds, and life annuities from insurers).
  – Distributions from South African trusts, regardless of the amount.

What happens to your unlisted shares after you emigrate from South Africa?

If you hold unlisted shares in South African companies and are planning to emigrate, you’ll be pleased to know that the South African Reserve Bank (SARB) generally allows these shares to be endorsed as non-resident assets.

• Dividend remittance: Dividends earned from these unlisted shares can generally be remitted offshore with Good Standing clearance.

Read more: South African private companies – don’t forget about non-resident endorsement of unlisted shares!

Will you have to pay capital gains tax on your emigration from South Africa?

Yes, you may be liable for Capital Gains Tax (CGT) in South Africa when you emigrate. This is because when you cease to be a tax resident of South Africa, SARS deems you to have disposed of all your worldwide assets (excluding your primary residence in South Africa and your retirement annuity). This deemed disposal triggers a CGT event, meaning you may be liable for tax on any capital gains realised on those assets. This is sometimes referred to as “exit tax,” although it’s technically just CGT on your worldwide assets.
The amount of CGT you owe will depend on your tax bracket and the total value of your assets. Careful tax planning before you emigrate is vital to minimise your CGT liability.

Read more:
The SA expat’s roadmap for moving funds abroad via SARS AIT Application.
Be Aware: ceasing SARS tax residency can significantly impact your taxes and international money transfers.

FinGlobal: cross-border financial specialists for South Africans

Moving money out of South Africa can be complicated. That’s where FinGlobal comes in. We specialise in helping individuals and businesses find their way through the complexities of South African exchange control regulations to ensure smooth and compliant international money transfers.

From tax emigration through to retirement annuity encashment, our expertise in South African regulations and global financial markets can help you understand the process and find the best solutions for your specific needs. We offer competitive exchange rates and strive to make your international money moves as efficient and stress-free as possible. Contact FinGlobal today to learn more about how we can assist you with relocating your finances after your emigration from South Africa.