Living abroad – should you emigrate formally or informally?

Living abroad – should you emigrate formally or informally?

As more South Africans consider living overseas, it’s a good idea to be aware of the differences between informal and formal emigration. Before deciding on which emigration path to take, consider your specific circumstances and goals.

The departments and issues that you’ll have to deal with when emigrating are:

  • South African Revenue Service (SARS) – for tax residency and tax returns
  • South African Reserve Bank (SARB) – for exchange control and transferring funds offshore
  • Home Affairs – for passport and citizenship

Formal emigration

Formal emigration is advisable for those who wish to move all their assets offshore including their retirement investments.

SARS: You become a non-tax resident. You are deemed to have disposed of all your assets (excluding fixed property in SA and personal use assets), which will result in capital gains tax on the deemed disposal even if the assets have not physically been sold. You are no longer required to submit a South African tax return.

SARB: Your exchange control status is non-resident. Your SA assets will be transferred offshore from your bank account on approval of emigration. You can transfer or cash out your SA pension and provident funds (subject to tax) even if under the age of 55.

Home Affairs: You remain a South African citizen and retain your right to hold a South African passport (as long as you apply to retain SA citizenship before taking on citizenship of another country).

Informal emigration

If you plan to retire in South Africa, informal emigration is more suitable.

SARS: You remain an SA tax resident and are required to submit an annual tax return unless below the tax threshold. However, any income earned offshore is not taxed in SA provided you meet certain requirements (these requirements are currently under review).

SARB: You are considered to be an SA resident for exchange control purposes. You can transfer R10 million offshore per person per annum as part of your annual investment allowance after obtaining tax clearance, in addition to a R1 million per person per annum travel allowance. You cannot access or transfer your retirement investments offshore if you are under the age of 55.

Home Affairs: You remain an SA citizen and retain your right to hold an SA passport.

So, one of the main things to bear in mind when considering emigration is your asset allocation plan – whether you plan to take all your assets with you or whether you plan to return to SA for retirement. If in doubt, consult a financial planner for more detailed assistance for any offshore financial planning.