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David Thomson, Senior Legal Adviser at Sanlam Trust explains that relocation means moving to a foreign country – usually for work purposes – without permanently exporting your assets. Emigration means moving permanently to another country, taking as many of your assets with you as you wish, and as exchange controls allow. Emigration is a South African Reserve Bank (SARB) process and it has tax and citizenship implications. With relocation, a number of factors will determine your tax implications. Consulting a licensed financial planner could help you make an informed decision.

“We generally advise people to think seriously about whether they really want to emigrate. Younger people, who may not have many assets, are often better off relocating and not emigrating. Even if they do have large sums to export, they can do so using the annual foreign exchange allowances.”

Thomson explains that individuals in good standing with SARS can currently invest up to R10 million abroad per annum. This gives them the option to seamlessly return to South Africa at a later stage. They can leave the income and capital they earned abroad by making use of the allowances; and they can begin or resume their careers in South Africa without the hassle of immigrating back to SA.

“However, if you have not emigrated, you remain liable for SA income tax on your worldwide earnings. SA has double taxation treaties with many countries, but not all. If you do not intend to return to SA it is advisable to emigrate and not just relocate to avoid being taxed twice.”

Thomson says the main reason for deciding to emigrate could be a need to take large sums of capital offshore in a short space of time – for example to retire overseas since you’ll need to buy property and provide for pension. You will then have to go through the proper SARB emigration procedures and obtain tax clearance from SARS.

“Whatever your decision, you should make a point of discussing it with your financial planner to ensure that your finances are in order. For example, you may not be able to obtain life and disability cover in your adopted country – or it may be prohibitively expensive. In such instances you will do well to ensure that you have sufficient funds in a South African bank account in order to pay your policy premiums. All your risk policies at Sanlam remain intact if you retain a South African bank account and if you comply with the policy terms and conditions. It is also important to note that returns on investments (in particular cash) are significantly lower in developed countries than in SA. For example in the UK you can expect 0.25% p.a. on bank deposits.”

Importantly, Thomson adds that you should execute a last will and testament in your new country of residence to make sure you comply with the law in that jurisdiction. If you retain assets in South Africa, you can also execute a local will. But if you do, clearly state that the local will only relates to your SA assets and make sure your overseas will clearly excludes your SA property and does not contain a blanket revocation clause.

Other factors to consider if you plan to emigrate:

  • When you become a non-SA resident for tax purposes, the SA Revenue Service (SARS) will consider your local assets as “sold” - even if you don’t actually sell them. This will trigger capital gains tax on all your assets and income tax on your trading stock.
  • If you want to export assets abroad the allowances are R2 million in household and personal effects plus R20 million per annum in other assets per family unit.
  • Any assets not taken out will fall under the control of your local bank, and your bank account will be designated as non-resident. You can use this account when in South Africa, plus pay for return airfares. Should the proceeds of retirement funds be deposited into this account, you can request that funds be transferred to the bank account in your new country of residence. The usual tax on lump-sums will apply.
  • Non-residents who have formally emigrated will still receive inheritance from a South African deceased estate, which can be remitted abroad to them.
Sanlam Life Insurance is a licensed financial service provider.
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