SA Emigration overseas

Emigration overseas – what you need to know

emigration overseas
Emigration overseas

As per the article of A. MASKOWITZ (Sep 17.2020) who is Fiduciary and Tax Specialist.

Are you planning to emigrate from South Africa? What impact it will have on your Retirement Annuity?



Certain announcements were made in the most recent Budget, which was released in February 2020, that the principle of emigration will be phased out. Emigration is becoming increasingly important for people who want to access their retirement funds. As everybody knows, after the age of 55, you can only use a retirement fund if you die or become incapacitated. However, existing law states that you can only use this retirement annuity fund after formalizing your emigration with the South African Reserve Bank. People under the age of 55 will, once their emigration has been formalised, cash in their retirement annuity fund and, after taxes, exit those funds from South Africa as part of their emigration.


The most recent law essentially modified the rule so that the trigger for cashing in a retirement annuity would no longer be emigration, but rather if you have spent three years as a non-tax citizen of South Africa. And this is in line with the Budget since the 2020 Budget stated that emigration is not always a factor in determining whether or not you are a tax resident. The rules for “regular residents” still apply. As a result, under the new law, you will only be able to use your retirement annuity after three years of non-resident status.


This isn’t exactly draconian. This is consistent with the anti-avoidance clauses of most contracts. If an individual holds a share for more than three years, that share is automatically deemed to be capital, according to section 9C. To put it another way, you can’t consider it profits or a trading asset, so you’ll only be entitled to capital gains. So three years is a general rule that states that this is a long enough time for citizens to avoid anti-avoidance provisions.


The same law can be found in the new exchange control regulations. If you emigrate and are unable to return to South Africa within five years, you will be considered a failed emigrant, and the SARB will be able to compel you to return your belongings.


So the three-year rule is now more tax-driven than emigration-driven, and all these press reports that the government is now keeping your retirement annuity assets for three years and giving you seven months to complete the process before the new law takes effect are, in my opinion, a little misleading. The law does not intend for this to happen. The aim is to turn the trigger into a tax rather than an exchange control trigger.


People who have been living abroad for a long time and have stopped being tax residents, for example, do not need to formalize their emigration. They will then access their retirement annuities without having to emigrate for exchange control reasons. So the act has a clear benefit for those who have been non-resident for three years as of March 1, 2020, because they will be able to use their retirement annuities right away.


Article: [online]