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Nike said "Just do it" but sometimes you can't!

Updated: Oct 21, 2021

There's emigrating from South Africa and then there's financially emigrating from South Africa and the two are definitely not the same thing. The upside, though, is that financial emigration is the easier of the two choices. However, although it's easier, it still generates a lot of questions and leaves people feeling nearly as scared as when they made the decision to physically emigrate. It also requires you to think through the options as you make your financial emigration decision because you don't really want to get it wrong.

This blog post will hopefully answer some of those questions for you. So let's get right in and ask some questions:

Do I have to financially emigrate?

The quick answer is no! Everybody has a different situation but there is nothing that forces you to financially emigrate. There’s been a lot of hype about the new expat tax rules but it’s all really hype. The greatest sales closing technique is driving people’s fears and that’s exactly what the hype does.

What happens if I don’t?

If you don’t financially emigrate it means you will have to fill in 2 tax returns – one for SA and one for the UK. Essentially the returns both use the same data but there are some complexities involved. SA works on a tax year end for individuals of 28 February. The UK uses 5 April! The tax rules for both countries are substantially different so if you don’t financially emigrate it’s best to get help with this.

That being said, if you don’t financially emigrate even though you have physically emigrated, your life in South Africa carries on as if you were still there. Your SA assets all stay under your control, as does your bank account and credit cards and, fortunately, the internet and online banking makes all this possible.

What happens if I do?

Life is likely to become a bit simpler if you do decide to financially emigrate. In essence, SARB allows you to take out a lot of your assets and, for what stays behind, the income flows generated by what remains. This would include rent, dividends, directors fees and retirement finding streams.

For those close to or already retired financial emigration allows you to draw out all the capital you have tied up in retriement annuities and the 1/3 : 2/3 rule no longer applies. Strangely, this doesn’t apply to pension funds where the 1/3 : 2/3 restrictions still remain.

If you do financially emigrate, your remaining SA assets are “blocked”. This is not as bad as it sounds – it simply means that everything you want to do with them has to be processed through the SARB. It restricts your freedom to operate in SA but, once you go this route, your intention should be to largely be departed form SA anyway.

Should I financially emigrate?

Only you can answer that question because everyone has a different set of circumstances. The solution here is to gather the relevant information (which is not that much and is freely available) and weigh up the pros and cons based on your life facts.

Why wouldn’t I financially emigrate?

There are defintely times when it doesn’t make sense to financially emigrate. In my situation, for example, I am still running my SA accounting practice. I go back there regularly (assuming there are flights and no nasty viruses around) to visit my clients. So I don’t want restrictions on my bank accounts for example because I need to trade through them.

If you still have assets in SA that you don’t want to dispose of or have tied down by SARB red tape then you shouldn’t financially emigrate.

Are the latest expat rules likely to force me to financially emigrate?

In most instances the new expat rules won’t force you to emigrate. To a large extent the current regime is no different to how it was before. If you spend most of your year out of SA then you won’t be taxed there anyway. For those earning larger salaries the new expat rules MAY start to become an issue but you have to be earning over R1 250 000 before that becomes a consideration. And then there is a Double Taxation Agreement between SA and the UK revenue authorities so what you pay in tax in one country can be set off against what you owe the other country. Sounds complex (and in the detail it is) but in general terms it means you are unlikely to be paying tax in both countries .

What must I do to financially emigrate?

This is a fairly simple process. You get a tax clearance certificate from SARS, submit that to your bankers, they help you complete a Reserve Bank form and then handle the rest for you.

How complex is it?

Obviously that depends on what assets you are leaving behind, but assuming there aren’t any then it’s a simple process. The more you leave behind the more complex it becomes.

How long does it take?

Like everything the time it takes to complete this process varies but a safe number to work on is 6 months. If you’ve already left and need to get otigianl documents back your MUST courier them. Sending them by any form of past is not going to work.

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