What is a financial emigration?
Before looking at the impact of undergoing a financial emigration, it is important to understand what exactly it entails. Financial emigration is the needlessly complex and time-consuming process of formally transferring your financial assets to a foreign country. It is also the most effective way to change your residence status from ‘resident’ to ‘non-resident’ for tax purposes. In other words, a financial emigration is the fastest route to cease your tax residence status with the South African Revenue Service (“SARS”).
Who should do a financial emigration?
South African individuals with a foot in multiple tax jurisdictions, often reach a point where they no longer see themselves returning to their home country. Whether because of favourable employment or whether you choose to settle down with your family in the foreign country, it must first be assessed if it is your intentions to make the move permanent.
Where do you stand with SARS?
If you are contemplating financial emigration, it must first be determined if your tax affairs are in order. If you have any doubt about your past tax matters or suspect that you might be on a bad footing with SARS, this must first be addressed prior to tackling the financial emigration application process.
Not only must your taxes be current and compliant, but you should be prepared for an audit. It has become common practice for SARS to request an audit once the financial emigration process has been initiated. This part of your financial emigration can quickly become technical and, if done too hastily, can result in penalties or charges due to SARS, which is why you need to consult a tax or financial emigration specialist.
Financial emigration and citizenship
A financial emigration only forms part of the emigration process. While it is the only sure-fire way to officially cease your South African tax residency, it only severs your financial being from South Africa. You could still be seen as a South African citizen.
It is important to consider all the variables that could negatively impact your finances before attempting to emigrate from South Africa. The process has become administratively burdensome over the years, especially from a tax perspective. SARS sees financial emigration as a last opportunity to correct potential tax shortfalls by a taxpayer before they cut ties with South Africa.
The effect of the controversial three-year lock-in rule on your retirement savings, not to mention the possible exit taxes you could face when doing your financial emigration, should be reason enough to get a tax specialist to assist with your emigration.
Financial Emigration is part of a group of companies which has been in existence for 17 years and are widely acknowledged as the market leaders in Expatriate Tax. The group was entrusted by Barry Pretorius, founder of the Expatriate Petition Group (“EPG”), and South African expats worldwide to represent them in parliament to fight the law change, which resulted in the R1.25mil exemption. The group also authored the LexisNexis’ first of its kind Expatriate Tax textbook released in 2019 and the second edition which launched in 2021.
Speak to us today should you have any questions regarding financial emigration. Our team is ready to assist.