In this newsletter we aim to demystify the term “formal emigration”, as there seems to be much confusion.
Some brief points on formal emigration
- First, it is important to know that residency from a tax perspective (as defined by SARS), a citizenship perspective (as per Home Affairs) and residency from the Reserve Bank perspective (according to the exchange control manual from the SA Reserve Bank) are not the same. Therefore, solutions should not be aimed at all three definitions but focus on the Reserve Bank definition. In this email, we will only comment on formal emigration from the Reserve Bank’s perspective.
- Before embarking on formal emigration, from the Reserve bank’s perspective, it should always be carefully considered. Formal emigration, once granted, can impose a lot of restrictions on assets remaining in South Africa and future assets that you might want to acquire in South Africa. This can range from your ability to operate normal resident bank accounts and access credit.
- Formal emigration can also trigger a capital gains tax liability.
In most cases, formal emigration is not something that should be considered for clients that are, for example, going to work abroad temporarily.
So who should consider formal emigration?
Typical cases for formal emigration include:
- If you do not have any assets left in SA
- If you wish to get your retirement annuity paid out before reaching retirement age
- If you expect inheritance from SA, to a greater value than ZAR 10 million
- If you wish to “cut all ties” with SA
- If you do not have a SA ID book anymore and cannot obtain a new one
Effects of Formal Emigration
- After your formal emigration, you will only be able to operate one so called “blocked ZAR account”, with one bank only.
- All of your remaining assets in SA will be blocked and will be placed under the control of your bank.
- You can take out your Foreign Capital allowance of ZAR 10 million per calendar year ( just as any resident can).
- You can take out your ZAR 1 million allowance per calendar year ( just as any SA resident can).
- You can export household and personal goods, motor vehicles, caravans etc within an overall insured value of ZAR 2 million.
- Your tax status at SARS might change, additionally this might trigger capital gains tax on assets.
- As a non-resident from an exchange control perspective, you can only obtain finance in SA according to non-resident rules after your emigration.
Formal emigration does not influence your SA citizenship, you will not lose your SA passport.
What is not considered Formal Emigration?
- Leaving the country
- Taking up another citizenship
- Having a “no tax status” with SARS in SA
- Paying tax in another country
- Not being present in SA for a couple of years (even after 5 years)
- Not having a bank account in SA anymore
- Not having any assets in SA anymore
Some further reading, here are the direct links to SARS
This information was provided by Incompass. They are foreign exchange specialists and are able to advise you on formal emigration and can assist with its implementation.
Please feel free to let us know if you would like more information or need assistance, and we can make an introduction.
Stuart and Jonathan