Ex­pats, taxes, and Mau­ri­tius

RISKSA Magazine - - Medical -

Af­ter years of work and rais­ing chil­dren, it is no sur­prise that many re­tirees opt to travel, with many go­ing on ‘grown-up gap years’ and in­ter­na­tional cruises. Some, es­pe­cially those whose chil­dren have mi­grated, choose to fol­low suit, some­times be­fore re­tire­ment age, and there are some tax ben­e­fits depend­ing on when they de­cide to leave. A change in South African tax leg­is­la­tion in 2008 pre­sented a unique op­por­tu­nity to South African ex­pats and their re­tire­ment funds where they can freely trans­fer their re­tire­ment sav­ings off­shore be­fore the recog­nised re­tire­ment age of 55. A com­pound­ing de­pre­ci­at­ing South African rand is just one of the rea­sons many choose to mi­grate and ac­cess their re­tire­ment ve­hi­cles early and in­vest abroad. There are also ben­e­fits for those who’ve mi­grated dur­ing their work­ing years and choose to come back to South Africa to re­tire. Ac­cord­ing to a rul­ing made by the South African Rev­enue Ser­vice (SARS), pen­sions ac­cu­mu­lated while work­ing out­side the coun­try will not be taxed.

Mau­ri­tius Phillip Kas­sel, fi­nan­cial plan­ner for Lib­erty Life, says that those of­fi­cially mi­grat­ing to Mau­ri­tius, re­gard­less of their age, can com­mute the full amount of their re­tire­ment fund to cash, pro­vided their tax af­fairs are in or­der. “SARS re­gards this as a with­drawal, and you will be taxed ac­cord­ing to the With­drawal Tax ta­bles, where only R25 000 is tax-free, and the bal­ance is taxed in a tiered fash­ion,” says Kas­sel, who warns that if the amount avail­able is fairly sub­stan­tial, this will re­sult in a large amount of tax be­ing de­ducted. Kas­sel says that re­tirees who have of­fi­cially reached the age of 55 can elect to ‘com­mute’ up to the full amount of the fund, but can­not en­cash more than one-third. “If you have never en­cashed funds from a re­tire­ment in­vest­ment, pen­sion or prov­i­dent fund in the form of a re­tire­ment, then the first R500 000 of the one-third of the fund is tax-free, and the bal­ance of the fund is taxed per the SARS re­tire­ment tax ta­bles,” he says, re­port­ing that this method of tax­ing is cer­tainly more ben­e­fi­cial than the with­drawal tax ta­ble. He adds that the bal­ance of the amount not ac­cessed in cash, can then be con­verted to an in­come, and such in­come is chan­nelled to the an­nu­i­tant in the coun­try of the re­tiree’s new domi­cile through a blocked Re­serve Bank ac­count, which the an­nu­i­tant’s bank must help fa­cil­i­tate. “The in­come thus re­ceived is taxed ei­ther in South Africa or in the new coun­try of res­i­dence, de­pen­dent on the agree­ments in place be­tween the two coun­tries, but no ‘dou­ble tax­a­tion’ will take place.” Kas­sel points out that an­nu­i­tants of re­tire­ment age (55 or older) will ac­cess far greater tax ben­e­fits if they de­cide to re­tire in Mau­ri­tius than mi­grants younger than 55.

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