Should you formally emigrate from South Africa and how to do it

What is formal emigration?

Formal emigration is also known as financial emigration. It means informing the South African Reserve Bank (SARB) that you will no longer be a resident in South Africa. This is done for exchange control purposes, which we will go into in more detail below. 

What formal emigration is not:

• Formal emigration is not physically moving overseas
• Formal emigration does not mean changing your citizenship status – you do not need to give up your South African passport
• Formal emigration is not a way to escape paying tax in South Africa
• Formal emigration is not compulsory – you don’t have to do it if it provides no benefit to you

Why you should formally emigrate from South Africa

Formally emigrating brings with it several advantages as the Reserve Bank no longer sees you as a resident for exchange control purposes, allowing you to access and transfer financial assets out of the country.

The main reason that people proceed with financial emigration from South Africa is that it enables you to access and transfer your retirement annuity before the retirement age of 55. 

This means that you don’t have to keep your RA invested in the volatile Rand and can instead invest it in a more stable currency. You also don’t have to reinvest these proceeds in another retirement savings product. You therefore have the freedom to spend it on what you wish, like your new home or travel.

If you are expecting to receive any of the following then it might be a good idea to formally emigrate as it will make it simpler to access and transfer these funds out of South Africa at a later date. 

• Inheritance from a South African estate 
• passive income (such as rent or dividends) 
• proceeds from selling a property
• income from a trust

Ordinarily as a South African resident (temporarily residing abroad), you have an annual discretionary allowance of R1 million per adult and a further R10 million can be taken out under your foreign investment allowance per calendar year. However if you have formally emigrated, there is no limit to the amount of money you can transfer out of South Africa.

Formal migration vs tax emigration

Formal emigration does not mean that you’re automatically considered non-resident for tax purposes. The  South African Revenue Service (SARS) has its own criteria to determine your tax residency status and whether or not you should be paying tax in South Africa. SARS will examine factors like how much time you spend in South Africa and where your family and assets reside. However, your formal emigration can be used as additional proof of your intention to settle overseas if your tax residence status is called into question. Please note: It alone is not enough to prove your tax residency.

After financial emigration you will only need to declare South African sourced income. Once you have no assets remaining in South Africa, you can deregister for tax through a formal process with SARS. Then you will be exempt from submitting tax returns.

Can I move back to South Africa if I have formally emigrated?

Yes, formal emigration doesn’t mean renouncing your citizenship. As a South African citizen, you are always free to live and work in South Africa. However, you will need to apply to the SARB to be declared resident again when you return.

Must I liquidate all my South African assets if I formally emigrate?

No, your asset portfolio can remain the same. You can hold and contribute to any assets in South Africa if you wish to. However, it’s a good idea to notify policy and other providers that you reside abroad as this may affect conditions in your contracts.

How does one formally emigrate from South Africa? 

You can formally emigrate yourself, but it’s a laborious and admin-intensive process. You need to deal with several different parties including SARB, SARS, the banks and investment companies, so many people choose to rather engage professional services to take care of the process for them. 

Every case is different, but the basic steps are:

• Make the application for financial emigration through a South African bank
• Apply for tax clearance from SARS
• Apply to SARB for formal emigration
  You will need to fill in forms (MP336) and submit supporting documents such as proof of permanent residence abroad.
• On receipt of SARB approval, your formal emigration is complete
• Proceed with opening a blocked Rand account and transferring funds overseas

If you wish to withdraw or encash your retirement annuity, there are additional steps involved in dealing with your investment company, so it’s best to speak with a certified advisor for assistance. 

About Sable International

We provide comprehensive financial and immigration services to private individuals and businesses with international interests or links. We are South African financial emigration specialists who can help you manage this complex process from end-to-end including: Financial emigration from South Africa, transferring South African RAs and other pensions abroad, transferring South African inheritances offshore and setting up non-resident Rand bank accounts.

Our team is here to help you secure your financial future. If you’re ready to formally emigrate, please fill in this financial emigration assessment questionnaire and we’ll be happy to start your free assessment. If you have any questions not covered in the article, you can call us on +27 (0) 21 657 2133 or send us an email.