Your ability to withdraw your South African retirement savings from abroad depends on your tax residency status with SARS. Janine (not her real name) encountered this when she wanted an early payout of her retirement funds.
Janine’s position: living in the Netherlands without completing tax emigration from South Africa
She is in her forties and has been living in the Netherlands for seven years. She hadn’t filed for tax emigration yet because she didn’t think she needed to.
So, SARS still regarded her as a South African tax resident, even though she earned a salary in the Netherlands that was paid into a Dutch bank account. She also paid income tax in the Netherlands.
Janine had South African retirement funds with certain restrictions.
She had a company pension fund from which she made a partial withdrawal upon resignation years ago. When the fund was moved to a provident fund, different rules applied.
How tax emigration affects retirement funds in South Africa
If you have formally ceased your South African tax residency and have been a non-resident for three years or longer, you can withdraw the full value of a retirement annuity or preservation fund before or after age 55. Ceasing your South African tax residency is a formal application to SARS.
SARS confirms it in writing and records the date your residency ended. Moving overseas, earning a foreign salary and paying tax in another country do not change your status automatically.
However, rules of your particular fund matter too. Some policies have no way of paying out early, even when the law allows it. Others allow only one withdrawal before retirement, which you may have already used. When that happens, you usually have to move the original policy into a different kind of policy in order to make the full withdrawal.
Janine ran into both of the above problems at once, so she approached us.
She wanted to make a withdrawal from her provident fund, but could not, because the fund rules changed after the withdrawal was made. Regarding the retirement annuity, general rules dictate that she could only make a full withdrawal once she had ceased her South African tax residency. During a retirement annuity withdrawal, it is also very important to take the corresponding double tax agreement into account, as this will dictate which country has the taxing right, and the withdrawal must be submitted accordingly.
How FinGlobal helped with her South African retirement funds
Once her tax emigration was in place and accepted by SARS, we could help her withdraw all the funds once the various rules were taken into account and she ticked all the boxes.
Get help with your South African retirement annuity and tax emigration
FinGlobal is one of the few service providers that assists with withdrawing South African retirement funds after ceasing tax residency. Talk to us if you’re in a similar position.
Article by Phillip Meiring, Expat financial consultant at FinGlobal.