Why you should inform SARS that you’re emigrating

By Janice Roberts

Tim Mertens, the chairman of Sovereign Trust SA

A growing number of South African expatriates risk falling foul of local tax laws because they don’t understand the concept of financial emigration, and therefore don’t act on it.

That’s the warning from Tim Mertens, the chairman of Sovereign Trust SA, who says it is vital that prospective expats go through the formal process of changing their status with the Reserve Bank to that of a non-resident when leaving the country permanently.

“If you’re emigrating from South Africa, or regard your home as being elsewhere, you can’t simply assume that you’re out of the tax net because you’re no longer living in the country. You have to level your affairs with the Reserve Bank and the taxman, or you’ll not only remain liable to report income, but you’ll also lose out on a host of benefits,” says Mertens.

By going through the financial emigration process, you will no longer be regarded as a tax resident of South Africa. One of the most important benefits of this is that retirement savings and annuities can be withdrawn and transferred offshore, even if you are still under the age of 55. This offers South Africans a significant level of protection from currency volatility.

Mertens says a popular misconception around financial emigration is that you have to give up your South African passport and citizenship. “Financial emigration doesn’t affect your citizenship in any way – you can keep your ‘green mamba’,” says Mertens. “It also doesn’t affect your ability to own property or assets in South Africa.”

Financial emigration is a three-step process:

  1. Contact your bank and complete what is known as an MP366 form. The bank sends this to the Reserve Bank.
  2. Contact SARS to apply to for an IT21(a) certificate, which confirms that your tax affairs are up to date and you have no outstanding issues.
  3. The SA Reserve Bank reviews the MP366 and tax clearance certificates, after which they make a final determination on your application.

South African expats living and working in areas like the Middle East don’t necessarily have to emigrate financially if they intend returning, but they will remain liable to submit tax returns, says Mertens – and after 2020, new tax legislation means they will be taxed on all income over R1 million. His suggestion is that expats in this position get advice from a trusted financial adviser when assessing their options.

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