So, you are either thinking or have made the big decision to emigrate from South Africa and suddenly there are so many things to sort out.

From trying to organise your VISAs/residence, finding where you are going to stay, what to do with all your possessions, schools, pets the list is seemingly endless.

In trying to get yourself organised have you had the chance to think about what potential the financial implications of your move are and how best you organise yourself.

Emigration in the South African context, from a physical and financial perspective are two different processes. This article is intended to help you understand the issues around financial emigration as well as a few other related issues.

Financial Emigration Process

What is generally referred to as financial emigration is a process that you go through with the South African Reserve Bank (Sarb) which changes your status from “resident” to “non-resident”. While a number of people physically emigrate from South Africa without financially emigrating it does mean that you may still have potential obligations in South Africa and you have not completely cut your ties with the country. It is not a legal requirement that you must financially emigrate when you physically emigrate; however, there are certain advantages of doing so. Financial emigration also makes sense when you are either leaving with no intentions of returning or you have already been living out of the country for a number of years and do not intend to return to South Africa.

So how do you financially emigrate? It is merely a process that you follow which involves SARS and Sarb. You need to submit a fully completed MP336(b) to Sarb after getting a Tax clearance Certificate – Emigration from SARS. Once your application has been approved by Sarb, your bank (called an Authorised Dealer) will then open an emigrant Capital account in your name and all of your South African assets will be brought under the control of the Authorised Dealer. All foreign transfers are then made by the Authorised Dealer form your Emigrant Capital Account.

While it may seem a pretty standard process, it involves a fair amount of bureaucracy and can take a many of months to finalise. Just getting the tax clearance certificate – Emigration can also present some challenges. It is easy to understand why the vast majority of people contract with a third party to assist with this process.

Once you have finalised your financial emigration with Sarb you will also be eligible for different foreign exchange allowances than when you were a resident.

If you are under 55 years old, apart from different foreign exchange allowances you will also have the advantage of being able to access the funds in your retirement annuities, which you may then transfer to your new country of residence. If you want to know the implications of doing this check out the article “What you need to know about Early Withdrawal of Your Retirement Annuities”.

Protecting your Wealth

If you are moving to a country which has quite a high level of tax you should also consider how you may be able to shield the wealth that you have accumulated from those high taxes. Once you are a resident of your new country all subsequent earnings will be subject to their taxes but there are opportunities to move your investments to low tax jurisdictions before you relocate. If you are still in the process of moving or contemplating a move, the setting up a trust in country which has a stable financial system and low rates of taxation is something that you should seriously consider.

Potential taxation issues

As you may know South Africa’s taxation system is based on your residency. The implication of this is that if your are considered to be “ordinarily resident” in South Africa you are taxed on your worldwide assets; however, if you are considered to be a “non-resident” then you are only taxed by SARS on your income that come from a source within South Africa.

Acquiring approval from the South African Reserve Bank to emigrate from a financial perspective is not connected to your tax residence. Financial emigration is merely one factor that may be taken into account to determine whether or not you broke your tax residence. The deciding factor remains whether or not you break your ordinary residence.

When you are considered to have broken your tax residency you are deemed, for tax purposes, to have disposed of your worldwide assets which could give rise to CGT – although there are various deductions permitted e.g. fixed property in South Africa.

So unfortunately, apart from everything else you have a fair amount to consider regarding the financial implications of your emigration.