To cease tax residency and be eligible to cash in your Retirement Annuity before the age of 55:

1. You must fail to meet the South African tax residency tests: as applied by SARS to determine whether you are either ‘ordinarily resident’ or ‘physically present’.
2. You must make a status-change application to SARS: for the Emigration Tax Clearance Certificate with supporting documents to prove your non-resident status.
3. You must expect an “exit tax” bill: this is Capital Gains Tax calculated on your worldwide assets, in terms of section 9H of the Income Tax Act.
4. You will be put through a stringent tax audit: by SARS auditors with support from the SARS Foreign Employment team who will assess your residency status assertion.
5. You must obtain approval from SARS: through verifying your tax compliance status and the source of your funds after which a bank (Authorised Dealer) may transfer your funds abroad.

A Retirement Annuity is a product offered by insurance companies as a tax-efficient savings vehicle for retirement.

Retirement Annuities in South Africa are governed by the Income Tax Act, No.58 of 1962 and access to these funds is strictly legislated. As a rule, these savings can only be accessed after the age of 55 when the retirement date is met. Even then, access is limited.

• The fund rules determine the retirement date, which is generally at 55, effective once you complete the administrative requirements to access your Retirement Annuity.
• You cannot cash in your Retirement Annuity until you retire unless you are totally disabled. In such a case, the rules do allow you to encash your Retirement Annuity.

Once the retirement date is reached you can only access and withdraw a maximum of one-third of your funds in the Retirement Annuity as a lump sum. This will be subject to income tax, determined by a tax table specifically applicable to retirement lump sums.

• The remaining funds in the Retirement Annuity must be used to provide you with a regular pension for your lifetime, which also is fully taxable.
• You can decide to apply the full fund value towards the monthly pension provision. It isn’t compulsory to take a lump sum upon retirement.

Many South Africans left without recording their emigration, as it didn’t seem necessary at the time. However, if you left South Africa without notifying SARS and you now wish to cash in your Retirement Annuity, you’ll have to meet all the administrative requirements.

Withdrawing your Retirement Annuity due to tax emigration is only possible before the age of 55.

• After 55 the post-tax lump sum (if you choose to take one-third as cash) will be remittable as part of your foreign capital allowance.
• If you are already receiving a regular retirement income, this money will be remittable (after tax) but the underlying capital will need to remain in South Africa.

The full value of your Retirement Annuity fund will be accessible when all the requirements for withdrawal are met.

• Income tax payable is specified in a tax table for retirement fund lump sum withdrawals contained in the Second Schedule to the Income Tax Act, No. 58 of 1962.
• The larger the lump sum, the higher the tax bracket and tax rate that is payable.

The tax table is as follows:

When applying the tax table to the lump sum amount, the rule of aggregation applies. This means that all previous retirement fund lump sums previously received are added together, which pushes you up into a higher tax bracket.

The lump sums that will contribute towards aggregation are as follows:

• Retirement lump sums received after 1 October 2007,
• Withdrawal lump sums received after 1 March 2009,
• Severance benefit lump sums received after 1 March 2011.
• Any lump sums received prior to these dates will not contribute towards aggregation.
• The aggregation rule is supposed to discourage people from accessing their retirement funds early.
• SARS keeps a record of all previous lump sums, so it’s important to get the correct information; as this can have a significant impact on your tax payable on the lump sum being withdrawn.

We will provide you with an initial no-cost, no-obligation, free consultation. Once your needs have been determined and the assessment completed you will be provided with a quote.

Once you accept the quote, fees are only payable upon successful completion of our service and can be paid from your fund proceeds. We do not work on a commission-based system, our fees are fixed and transparent and will always be clearly communicated to you.