Emigrating South Africans must now wait three years to withdraw from their retirement fund

As noted in previous newsletters, an impending change to South African income tax legislation links the ability to receive the after-tax proceeds of a withdrawal from a South African retirement fund upon emigration to the length one has been a non-resident of South Africa for tax purposes.

Current position

Currently, when one emigrates from South Africa, one may withdraw from one’s pension, provident, preservation or retirement annuity fund upon the South African Reserve Bank (the SARB) recognising one’s emigration for exchange control purposes. From 1 March 2021 however, the concept of “emigration for exchange control purposes” is to be phased out. It will no longer be necessary to notify the SARB when one moves permanently to another country.

The new rule

Instead, the South African revenue authorities have instituted a new requirement to have funds from one’s retirement fund released. Emigrants can only withdraw monies form these sources if they have been non-residents of South Africa for tax purposes for at least three years from the commencement date of the new rules.

Takeaway

If you are planning to leave South Africa for greener pastures and need your retirement funds for expenses in your new home, it would be best to formalise your emigration for exchange control purposes by the end of February this year (2021). Delay longer than that and you will have to have ceased your tax residence and waited until 1 March 2024, at the earliest, to secure your retirement nest egg.  You are welcome to contact us if you have any questions about this change to the law.

Contact us to discuss if this could be relevant for your business.

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How can we help?

How you structure your business is a critical question as you expand globally.  The right structure will protect your assets, improve your currency position, support your business operations, facilitate future business expansion and changes, and optimise your overall tax rate. Trying to unscramble a sub-optimal structure entered into in haste or without full consideration of relevant facts is complex and expensive, so it’s important to plan upfront.

Structuring an international business is both a science and an art – this is our specialist area of expertise. Regan van Rooy is an international tax and structuring advisory firm focussing on Africa. We have offices in South Africa, Mauritius and Ireland and we can help you with any international tax or structuring query.

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