Emigration, delays, double tax and other worries

Emigration is now hot on everyone’s lips.
Taxpayers will be subjected to a hindsight (three years) non-tax residency test. Image: Shutterstock

Emigration is now hot on everyone’s lips following a change to the process and the introduction of the three-year non-resident rule to access the lump sum withdrawal from retirement annuities and some preservation funds.

In terms of the change taxpayers will be subjected to a hindsight (three years) non-tax residency test from March 1, 2021 to access their funds. The concept of residence and non-residency from an exchange control perspective, the current test, will be abolished on February 28, 2021.

The only way to access the lump sum in the retirement annuity or preservation funds (where one withdrawal has been made) will be to wait until you have been tax non-resident for three or more years.

Read: The three-year rule for tax emigration sticks

Aneria Bouwer, tax partner at law firm Bowmans, says people who are active members of pension or provident funds will not be impacted by this change.

“If they resign from their employment they can still receive the full amount, it will be taxed and they can invest it offshore.”

She shares the criticism on the three-year rule stating that people do not “simply flip-flop” between being resident and non-resident because of the massive tax implications.

Bouwer also shares concerns that the funds may depreciate in value while people have to wait to gain access to their funds. The main reason people are leaving the country is because they are concerned about the economic and political future of SA.

However, she considers the current panic to be completely “illogical”. People are concerned about government not wanting to give them access to their savings, and that has resulted in people thinking they have to emigrate immediately.

“It is tragic how people who would not otherwise have taken steps to formalise their emigration will now do it because they are concerned – rightly or wrongly – about their access to their retirement savings.”

She advises people to consider what retirement funds they have and whether they will be impacted. If they are still active members to an employer-related pension and provident fund they will not be impacted.

Another concern that has been raised it the potential of double taxation. Bouwer notes that when people eventually get the right to withdraw from the retirement annuity or preservation fund it will be considered a tax event in SA that will most probably give rise to a South African tax liability.

“The potential risk, if they have in the meantime become tax resident in a foreign country is that the foreign country could also impose tax on the amount.”

One would like to assume that it would not be taxed in the foreign country because the income relates to an asset which was acquired before the person became a resident in the foreign country, but individuals will have to consider this based on the rules of the foreign country, advises Bouwer.

Generally, she says, it should not be a problem because most countries will tax the person going forward and not necessarily on assets that they have accumulated before becoming tax resident in the foreign country.

However, Hugo van Zyl, vice chair of the personal and employment taxes work group at the South African Institute of Tax Professionals (SAIT), notes that this is not the case in Australia.

South Africans will pay double tax on the income from the retirement annuities or preservation funds they receive annually or monthly. However, if they were able to cash out, pay their South African tax on the amount they would not be taxed in Australia.

Van Zyl also notes the “bad timing” for people who are now in a hurry to emigrate. People who are submitting their emigration applications for approval by the South African Reserve Bank, may be faced with the provisional tax payment in February, as well as a potential capital gains exit tax. This may include capital gain on the deemed disposal of the home in Portugal that was acquired to obtain residency.

He has been warning clients that they may not get timeous access to the lump sum withdrawal from their retirement annuity or preservation fund to pay for the exit tax.

This is mainly due to the existing Covid-19 backlog and a new “panic filing” bottleneck as both the Reserve Bank and retirement funds dealing with the flood of withdrawal applications are not fully geared for the increase.

Another delay that is being anticipated, says Van Zyl, is obtaining tax emigration clearance. There is concern that the South African Revenue Service is equally unprepared to deal with the increased demand. There is already a backlog because of the impact of the Covid-19 restrictions, he adds.



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Ozzies often refer to their receiver of revenue as the “Stasi-Gestapo”

That beautiful country is fast losing its sheen

This article is nonsense. There is nowhere to emigrate to at the momeny. Is this Visser writer living in a delusional world?!

UK has double lockdown. Australians cannot fly. Unless you are going to Asia, this whole article should be deleted.

Enjoy the ANC Gulag that is SA. Ask the many thousands of Central and Northern Africans who want to “emigrate” by whatever means possible. In desperate times, desperate measures get it done.

One, emigration and/or residency processes take months, so by the time they’re completed, many more countries will be opening borders (especially as Europe gets past the worst of winter).

Two, as much as Oz and the UK get primarily mentioned here (being primary targets for SA emigrants) there are *plenty* more emigration/residency options out there. I just got residency in Spain, without even putting foot in the country, or having to invest or buy property. Yes, it’s because I already had a UK passport, and there was a special program for British passport holders, but it’s a symptom of countries realising – now more than ever – that they need to attract those with capital or skills.

For those searching, look at Mediterranean countries, Ireland, some of the more developed Latin American countries, South-East Asia – there are still a ton of good emigration options…

Agreed. South Africans are looking at countries in Latin America as well. For example, the Facebook group “Panama for South Africans” has more than 26000 members. Costa Rica also appears to be gaining traction. Georgia is also worth looking at. South Africans can stay in Georgia for up to a year without a visa so there’s lots of time to “try out” the country before applying for say, a work residence permit under quite reasonable terms.

It is truly a tragedy to read on a financial website that emigration is such a topical issue-and it clearly is.

To lose the wealthier, more educated and vital job creating people is a sad reflection-not on the government alone but more importantly on its voters who have repeatedly re-elected a crime syndicate to power despite full knowledge of their conduct.

There timing is probably good-short term ZAR strength, then post COVID 19 recovery and offshore yields reset and long term goodbye to the ZAR as the fiscal cliff approaches

to quote Forest Gump for the ANC regime; “stupid is as stupid does”.

Emigrating is obviously not your best idea right now, not for the foreseeable future and certainly not for anyone elderly, retired or approaching retirement.

I believe that one should retire “downstream.” Spend your career earning money in a well-paying country and retire to a country with a lower cost of living. emigrate once, or seldom, don’t country-hop.

Double taxation is not too onerous to manage, if you do your research and prepare properly.

It’s not necessary to go elsewhere, but do consider the following things:
Invest offshore, preferably in Asia;
send your children to school in a country with excellent education;
then let them build their careers in a developed country.

Emigration depends on so many factors. I don’t agree that the elderly should be excluded from this option. If they and/or their children overseas are wealthy enough and the country in question has a family visa program then, unless they are intent on staying here, it should definitely be an option. The elderly are the target of crime in South Africa and this is bound to get worse.

Retire in a country with a good public health system, unfortunately the older you get the more fragile you are and money can only take you so far. Having access to free / less expensive health care should play a big part in deciding where to retire.

Do however agree there are more opportunities from a career perspective in a developing country, you do however have to balance what’s best for your family vs best for your career. Almost 50% of your career coincides with starting a family and making sure your children gets the best head start possible in life. It’s not always possible to get that in a developing country.

I agree but always consider what happened in Zim. Sure, you may have investments overseas but wealth tax could gobble them if they are legit.

So, if your children emigrate as you suggest (I agree), stay on good terms with them; they may have lodgers.

From a money point of view and from a number of other considerations, AUS and NZ are not great places to move to from ZA.

In my experience Canada is the best kept immigration secret out there. Seriously. Whatever you do, don’t move to a country with an AK 47, a spear or a clenched fist on the flag…. those always fail in the long run. Or where politicians call each other “comrade”. Or where the president is called the Crocodile or some such horrible animal.

@Beopens Mr. Trudeau/liberal keeps letting in thousands of migrants annually, I guess we all know how a rainbow nation turns out 😉

perhaps, but watch out for icy-cold winters in the eastern provinces – forever rainfall in Vancouver.Winters are extremely long in Canada.But yes, a safe authentic multicultural country to live in and one of only a handful of nations that have copious amounts of fresh water. (the new gold)

“… don’t move to a country with an AK 47, a spear or a clenched fist on the flag.”
Agree fully but also include a sword, just for Saudi Arabia and most of their ME neighbours.

Don’t really agree with this statement at all, or at least from an Australian perspective.

I emigrated about 3 years ago, started working at a mine up in North Queensland. My salary package more than doubled compared to what I was earning in South Africa. Some more examples would also be some roles I had to fill in my team, accountant roles that had an offer of $155k per annum. (includes some remote living allowances fair enough)

My wife is also a good example, she had a part time job (4 hours a day for 3 days a week) and earned more than she was earning back in South Africa as a full time store designer for Shoprite.

Besides perhaps rent, dining & vehicle related costs (registration, insurance etc), the rest is either in line or cheaper than South Africa.

I visited my family back in Dec 19, before I arrived I had this idea that I would shop till I drop due to the AUD vs ZAR exchange.. but soon realised everything in SA is extremely expensive (except dining out).

I’m wondering what the emigration numbers would look like if the ordinary Black South African could quietly hop over the border to a functioning and orderly Zimbabwe. Surely millions would ‘vote’ with their feet.

All these government rules and control over retirement annuities and preservation funds will force future investors to shift to informal and under the radar means of saving for retirement.

Is any data available on ‘tax emigration clearance’ figures from SARB or SARS? With SA’s fragile state finances this is becoming crucial information

End of comments.



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