Nov 11, 2020 | Article

The SARB is moving away from the concept of emigration. This will necessitate changes to the Income Tax Act which has references to emigration in relation to taking retirement fund amounts out of South Africa.

Currently, if you formally emigrate, you are permitted to cash in your retirement funds entirely as part of the emigration process and, having paid the requisite taxes, take the funds with you.

The 2020 Tax Laws Amendment Bill includes proposed amendments which now refer to a person’s tax residence rather than emigration. If passed into law, from 1 March 2021, it will only be possible to export the proceeds of retirement funds three years after ceasing to be a tax resident. The onus of proof is on the taxpayer in this matter but we would like to mention that currently one can indicate on your tax return that you consider yourself not to be a tax resident. Given this situation it will be difficult to argue that you ceased to be a tax resident prior to making this declaration.

In any event it should be borne in mind that ceasing to be tax resident is a CGT event and that will trigger payment of CGT on all taxable assets where a gain in value exists at that date. No sale of assets is required for this to be the case. It has been common practice among Saffers who are working abroad to merely relocate and not formally emigrate. Those who do not expect to return to South Africa and who may want to access retirement funds within the next three years should consider formalising emigration under the current laws prior to 1 March 2021.

The CGT implications should be borne in mind.

There may also be those who currently reside in South Africa but who are thinking of emigrating. To the extent which they are practically able to do something about the date of their emigration they may wish to consider these new proposed tax laws.


(Source: Rob Evans – Surelink Wealth)