Financial emigration offers significant benefits

Tim Mertens

A growing number of South African expatriates risk falling foul of local tax laws because they don’t understand the concept of financial emigration, and therefore don’t act on it.

It’s therefore vital that prospective expats go through the formal process of changing their status with the SA Reserve Bank (Sarb) to that of a non-resident when leaving the country permanently.

If you’re emigrating from SA, or regard your home as being elsewhere, you can’t simply assume that you’re out of the tax net because you’re no longer living in the country. You have to level your affairs with Sarb and the taxman, or you’ll not only remain liable to report income, but also lose out on a host of benefits.

By going through the financial emigration process, you’ll no longer be regarded as a tax resident of SA. One of the most important benefits is that retirement savings and annuities can be transferred offshore, even if you’re still under 55. This offers a significant level of protection from currency volatility.

A popular misconception around financial emigration is that you have to give up your SA passport and citizenship. Financial emigration doesn’t affect your citizenship in any way. It also doesn’t affect your ability to own property or assets in SA.

Financial emigration is three-step process:

Contact your bank and complete what is known as an MP366 form. The bank sends this to Sarb.

Contact Sars to apply to for an IT21(a) certificate, which confirms that your tax affairs are up to date and you have no outstanding issues. a

Sarb reviews the MP366 and tax clearance certificates, after which they make a final determination on your application.

SA expats living and working in areas like the Middle East don’t necessarily have to emigrate financially if they intend returning, but they will remain liable to submit tax returns and after 2020, new tax legislation means they’ll be taxed on all income over R1 million.

Expats in this position should get advice from a financial advisor when assessing their options.

Tim Mertens is chair of Sovereign Trust.