Financial emigration is the process used by many South Africans abroad to formalise their non-resident status for both tax and exchange control purposes.
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The topic of Financial Emigration is often discussed on this page and thus it is appropriate to update some information for all.
The Financial Surveillance Department of the South African Reserve bank as of the 1st March 2021 amended the Currency and Exchanges Manual for Authorised Dealers.
In a nutshell, the concept of Financial Emigration has been phased out!
The new terminology is a non-tax resident. It is important to state that this amendment only affects South African residents and South African emigrants living abroad who have not formally emigrated prior to 1st March 2021.
We explain the changes below as simply as possible.
Section B.2(J): Private individuals ceasing to be South African tax residents.
The previous process of formerly emigrating involved two scenarios’:
- An individual went through a formal emigration process whereby they applied to SARB to emigrate through their bank by completing an MP336(b) form.
The emigration process would then involve tidying up their tax affairs with SARS. Once in order, SARS would provide a tax directive to the individual.
The final step would be SARB approving the emigration and placing it on record that the individual is a non-resident of SA.
- If a South African resident has been out of the country for more than 5 years, is a resident of another country, with no assets left in SA, they could complete a MP336(b) form, and a bank could log this with SARB to declare that person a non-resident of SA.
This process of emigration has been phased out. An individual wanting to “emigrate” will only deal with SARS.
They will apply to SARS for a Tax Clearance Certificate to remit money offshore from the sale of their assets, and then apply to become n0n-resident for tax purposes. This does not however make them a non-resident of SA.
If that individual decides to travel back to SA and spends extended periods in SA, then the SARS physical presence test will apply, and they could then qualify to be taxed in SA again in the future.
The new section now states:
A South African living in SA and a South African living abroad who has packed up and left the country are now viewed as one and the same.
Therefore, the R 1million SDA and the R 10 million FIA applies to both.
The implications of this change:
The change in regulation does not necessarily affect SA residents wanting to “emigrate”, it may make the process easier and cheaper as it cuts out involving the commercial banks as well as SARB in the process who charge for the emigration.
Individuals are not declared non-residents any longer and residency as well as tax obligations may kick in again based on their movements in a period of time and business dealings within SA.
In respect of the withdrawal of retirement funds, payment of lump sum benefits to individuals may only occur once the individual has remained a non-tax resident for at least 3 consecutive years.
The issue regarding the change arises primarily for those who left South Africa and:
- Did not formally emigrate before 1st March 2021, and
- Have misplaced their SA Green Barcoded ID Book, or
- Do not have their SARS income tax number
If you do not have your ID book, you will not be able to remit any funds out of SA.
Solutions to SA residents abroad:
As it stands currently:
Unfortunately, those who have not formally emigrated and have misplaced their Green Barcoded ID Books, will need to apply for a new ID book if they are to receive inheritance or other flows of funds from SA.
If you have an ID book but cannot remember your SARS tax number, or if dormant as you have been out of SA for that long, you will need to reactivate your SARS tax number via e-filing or a tax practitioner to remit more than R 1 million.
SARS have offered a remedy that SA residents abroad will need to go through the TCR01 process with SARS to confirm that they are non-resident for tax purposes.
This has not been tested yet and we cannot clarify how this will affect those with no ID Books or SARS tax numbers yet.
- Income Tax in Germany
- SARS – Supporting Documents for Emigration
News articles worth reading
- Businesstech – here are the new rules
- Moneyweb – Financial emigration: What is it and when is it appropriate