Proudly sponsored by

Government looks to amend tax laws to keep hold of retirement funds

New legislation seeks to prevent South Africans who no longer pay tax in SA from withdrawing retirement funds until they can prove non-tax residency.

On July 31, the  National Treasury and South African Revenue Services (Sars) released a draft of the new Tax Laws Amendment Bill (TLAB).

The proposed law changes again effectively proved to be another move from the government to get their hands on retirement funds. Please note that for the purpose of this article retirement funds include, pension preservation, provident preservation, and retirement annuities.

The new legislation seeks to prevent South Africans who no longer pay tax in South Africa from withdrawing retirement funds until they can prove non-tax residency for an uninterrupted period of three years or longer.

The proposed changes according to the TLAB, are looking to come into effect at the start of the next tax year, which is March 1 2021.

As per the February 2020 budget, it was announced that foreign-earned income above R1.25 million will now be taxable. People that had applied for financial emigration were exempt from tax, granted they had the financial emigration status, but this entire system will now be phased out by March 2021.

The current legislation as it stands allows South Africans who have financially emigrated, and have concluded the exchange control process of financial emigration, as recognised by the South African Reserve Bank (Sarb) to be able to withdraw their retirement funds in full.

There has been a recent increase in South Africans looking to formalise non-resident status to withdraw their retirement funds from South Africa and invest in a more stable economy. This could be the core reason that the government has taken the decision to crush the outflow of retirement funds, by proposing to change the way in which people exit.

This new change will be implemented by introducing a new test which will make provisions for payments of retirement lump sum benefits for when a member ceases to be a tax resident in South Africa.

The change is looking to be implemented in the next seven months which does not give people much time to withdraw their retirement funds from South Africa if they have formally emigrated. Please also be advised that the process to financially emigrate is a lengthy process so it is advisable that ex-South Africans do not leave the process to the last minute.

The introduction of this possible law change was not too much of a surprise, as we are all aware of how the government is closing in on retirement funds. The release of the TLAB still needs to run its course but we would advise that should you be in the process of financial emigration, finish the process before your retirement savings are locked in.

Disclaimer: Please note that we are not experts on this subject and the above article is for information purposes only.

ADVISOR PROFILE

Michael Haldane

Global & Local Investment Advisors

Do you have any questions you would like answered by registered financial planners?

SUBMIT YOUR QUESTION SIGN UP AS AN ADVISOR

Get full access to Moneyweb's financial insights and support quality journalism.

Only R63 per month or R630 per year. You can cancel at any time.

COMMENTS   5

Sort by:
  • Oldest first
  • Newest first
  • Top voted

You must be signed in to comment.

SIGN IN SIGN UP

Would this apply to leaving employment and having immediate access to your pension funds? Or will this also be locked for 3 years if one chooses to cash it in?

The article states — “As per the February 2020 budget, it was announced that foreign-earned income above R1.25 million will now be taxable.” BUT this only applies if you are a SOUTH AFRICAN TAX RESIDENT and not to all citizens, expat’s, South Africans.

That’s a superb decision. Government must try by all means to prevent the emigration of people with our wealth. We need development through taxes. We want free higher education for our kids as we can’t afford whereas they meet the requirements for admission to higher education institutions. Institutions like SAICA, ECSA etc have very low numbers of Africans. This effort therefore has to assist in generating funds for such purposes.

sthera, I have no idea by what logic other people’s retirement savings can possibly be classified as your wealth. Theft remains theft, even (or rather especially), when committed by the so-called “lawmakers”.

Sounds okay, but the ‘allows govt to get hands on pension funds’ is misleading and will cause panic in country.

This law will probably affect nobody living in SA at present!

End of comments.

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR
Moneyweb Insider INSIDERPRO
R1750pm

For financial professionals. Moneyweb's Insider Pro subscription will allow you to promote your financial services to the Moneyweb community.

This subscription includes a
Click an Advisor profile on Moneyweb.co.za.
NEWSLETTERS WEB APP SHOP PORTFOLIO TOOL TRENDING CPD HUB

Follow us:

Search Articles:Advanced Search
Click a Company: