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People have different reasons for emigrating. For some, it’s the allure of new horizons and the endless life-changing experiences it offers. For others, it’s an escape from whatever bothers them the most about their own country.
Whatever the reason, such a significant step requires thorough planning, especially when it comes to financial matters such as retirement savings.
For those who are invested in a retirement annuity (RA), understanding the implications of emigration is as crucial as deciding whether to take your in-laws.
An RA is a popular long-term savings vehicle in South Africa, designed to provide financial security during retirement. It allows the investor to make regular contributions that are invested in various asset classes, accumulating growth over time.
One of the key benefits of RAs is the tax advantages it offers, such as tax-deductible contributions, tax-free growth, and tax-free withdrawals of up to R550 000 upon retirement.
The South African Revenue Service (SARS) introduced new laws and regulations in 2021 regarding the treatment of RAs for individuals who choose to emigrate, and if you’re leaving our shores soon, it’s best to take note of these.
Among these changes are that individuals who are part of a retirement fund would be eligible to receive lump sum benefits “only upon meeting the requirements of ceasing to be a South African tax resident” and “maintaining such non-residency status for a minimum of three consecutive years”.
In other words, if you leave, you’ll have to wait for three years before any funds are available.
However, expatriates will bear the responsibility of proving their tax residency status in another country for the required duration. Furthermore, they will need to provide evidence of their physical absence from South Africa during this specified period.
It is crucial to thoroughly assess all aspects of the situation, as significant tax consequences exist regardless of the course of action chosen. Opting for early withdrawal of your retirement funds will result in considerably higher tax deductions compared to withdrawing the funds after retirement.
When you cease to be a tax resident, a deemed disposal occurs for capital gains tax (CGT) purposes. As a result, you are treated as if you have sold all your worldwide assets at their market value, excluding immovable property owned in South Africa and personal-use assets.
All this makes emigrating so much more than just an emotional issue. The complexity of moving your finances out of the country is obviously far beyond most people, so it’s crucial to involve companies like Consequence Private Wealth Management.
They have decades of experience in both local and offshore investing, foreign bank accounts, money transfers, and trusts, as well as advice on all legal issues.
Whatever your reason for leaving South Africa, don’t try and go it alone. Rather speak to a professional.
[source:moneyweb]
