Do it yourself financial emigration

[Shaugn]

Thought I'd share my recent experience with applying and getting financial emigration status myself. I didn't use an agent, but just worked with the foreign and migrant banking department at my bank (Nedbank - the others will have similar). This was correct as at June 2016

 

Note that payment of RA's could follow a slightly different process if you already have permanent residency and have a certificate of residency i.e. I don't think you need to financially migrate. I'm still in transition to PR so this is the route I chose to close everything out.

 

It was relatively simple, albeit a long process (because of postal delays, but let me explain). This is not all the docs you need and could differ from bank to bank. These are just the ones that could cause the most hassle.

 

1. Firstly, make sure that you are tax compliant. Go to e-filing and get everything up to date. You will need this when you make your online submission through e-filing for a Tax Clearance Certificate for financial emigration. If you have trust funds/ shares etc that need a high level of accounting sophistication to get your tax affairs sorted, use your accountant. I'd divested everything before leaving so mine was simple i.e. a bank account and some RA's. At the same time, get a statement of assets and liabilities from you accountant, or draw up one yourself. You will need this for the bank form 336b. Oh, get the latest statements of your RA/Pension etc that matches the assets and liabilities from your broker. These are the things that take time
2. Then, start the process with your bank. You will need to provide them with original 336b, statement of assets and liabilities and the other stuff they need like visa/passports etc. I sent mine via international courier to the bank Postbox - don't do this - dumb idea. Send it via courier to family/friend direct and get them to hand in at the bank on your behalf. (My originals floated around in the SA Post ether for a month before they turned up at the bank)
3. Once the bank had my stuff it took a day for them to pdf me the stamped 336b back. I'd verified with my banker the docs I was sending so it was all pre checked). Bank sets up blocked account (basically my foreign bank account) for me to pay SA funds into. My banked charged me ZAR3000 for their part.
4. Go -SARS e-filing and apply for tax clearance certificate - they send you a document with things they require - remember to include you passport/id, it's not on the list but your application will be rejected without it (ask me I know!) You can use the pdf 336b from you bank on line - no need for originals to be sent at all to SARS.
5. TCC was granted within five days of the application.
6. Send bank  the TCC. They then apply to the reserve bank for foreign exchange clearance (takes between 5-8 days)
7. Bank then sends you all the approvals and a letter to use for your RA payouts.
8. Send these to your broker, fill out the forms they will send back to you. Wait for tax directive (my broker has applied on my behalf). Wait for payments to blocked account and then transfer offshore or local as required.

 

Just go through all the docs and make sure everything tallies and is consistent. SARS / SARB/ Bank process was quick and easy.

Even if your financials are complex - the financial emigration part can still be done by yourself for minimum cost.

The big thing is ensuring that you are tax compliant before kicking off the process.

 

I hope that those of you that were perhaps hesitant of going it alone will be helped.

Shaugn

 

 

 

[Husky]

Thank you for the detailed advice @Shaugn

This is very useful.

[oli4]

Thank you!! Been filling in all the required forms but didn't know what to do next. Great help

[Shaugn]

As an update, I had also applied for an Australian Certificate of Residency - see https://www.ato.gov.au/Individuals/International-tax-for-individuals/In-detail/Residency/Certificates-of-residency-or-status/

This was simple - just make sure that your tax status is listed as "resident" (This refers to you being resident for tax purposes and not your immigration status). Takes a week or two to send the certificate to you.

 

Why do you need this? - for some reason both my Insurance providers needed this to process the RA payout, irrespective of the fact that I had supplied all the docs proving financial emigration.

I suspect that the insurers do not know the difference between formal and financial emigration.

 

[CableThief]

Thanks for the updates @Shaugn. Wil bw doing this soon. I was curious if i could release my ra's before i left seen that i have a pr visa already. But at least one advisor told me i need to be tax resident before i can release those, ie i have to ne in oz. From your post it also seems that one must be tax resident before ra release from sa even of one has a pr visa before leaving?

 

CableThief

[Shaugn]

Three followup notes on questions asked here and elsewhere

 

Note - I'm not a financial advisor or migration professional - this is from my own personal experience:

 

As at June 2016

Time Line : Started May and paid out 31 August

Note : lost a month in post delays (Not  SA Post fault - just took  three weeks for the bank to go and collect the docs), Insurers will take 4-6 weeks to do their bit.

SARS and SARB turnaround was a couple of days for the TCC, about two weeks for Reserve bank clearance, bank was 48 hours to get the 336b signed (after they had finally received the doc's)

So bargain on four months.

 

Blocked Account - we are still able to transact with this account, just you have to work through your account manager.It's no biggy. If you have to pay someone in SA on a regular basis, just do so from your Australian bank account (mine does the forex change on line and pays to any destination in the currency of choice). I'm not sure, but it may be frowned upon by SARB to do a financial migration but still have a significant debt that needs to be settled in SA without some sensible plan of repayment.

 

Tax resident - The ATO needed to know that 1. I'd migrated, 2. I had a tax number, (get this online as soon as you've confirmed where you are staying, ATO will send it to this residential address) 3. I was paying tax in Australia (I'd submitted a tax return or was intending to - When you apply for tax number indicate that your are a resident (for tax purposes)). They do not appear to be concerned with visa status but are interested in your tax.

 

Do all have to financially migrate? - From what I can see it's a choice (and they do give you this option when you apply for the TCC/336b) - Lets say all the RA's are paid for by one partner (irrespective of beneficiary) - that person can financially emigrate, and you can leave the other partner's bank accounts intact and transact from there if necessary.

[ChrisH]

2 hours ago, Shaugn said:

from your Australian bank account (mine does the forex change on line and pays to any destination in the currency of choice)

 

Out of interest, which bank are you with?

[Mara]

All banks in Australia have that facility! There is no exchange cintrol here..

[Erik]

I'm going to try it in 2019 - watch this space!

[TimeToGo]

I'm watching Erik... any news?  Is the process as outlined by Shaugn still the same?  I'm probably going to start the process using Standard Bank, but I'd like to hear if there are any updates.

[BellaR]

Is it necessary to do financial emigration if you have nothing left in SA? No assets, no liabilities, no RA’s, nothing, nada, zip... been in Aus 6 and half years, have citizenship and no intention of going back. 

[XXXXX]

On 5/25/2019 at 5:02 PM, BellaR said:

Is it necessary to do financial emigration if you have nothing left in SA? No assets, no liabilities, no RA’s, nothing, nada, zip... been in Aus 6 and half years, have citizenship and no intention of going back. 

 

The key question is why you'd want to do financial emigration?   A valid reason would be to access a South African Retirement Annuity fund!   An invalid reason would be probably be to do it for tax purposes!  ( and there is a ton of misinformation being spread by migration agencies in this regard).

 

But if you would like to do it for tax reasons, and based on the information that you have provided above, you have no need to.   The South African Income tax act (and the DTA between Australia and South Africa) would see you as a Australian resident.    

In the situation described above, don't waste your time and money on a financial emigration........

Edited May 30, 2019 by XXXXX
correction of text

[BellaR]

5 minutes ago, XXXXX said:

 

The key question is why you'd want to do financial emigration?   A valid reason would be to access a South African Retirement Annuity fund!   An invalid reason would be probably be to do it for tax purposes!  ( and there is a ton of misinformation being spread by migration agencies in this regard).

 

But if you would like to do it for tax reasons, and based on the information that you have provided above, you have no need to.   The South African Income tax act (and the DTA between Australia and South Africa) would see you as a Australian resident.    

In the situation described above, don't waste your time and money on a financial emigration........

Yep, after some research I realised it’d be a total waste of money, thanks for confirming! 

[Mauro]

On 5/30/2019 at 4:02 PM, XXXXX said:

 

The key question is why you'd want to do financial emigration?   A valid reason would be to access a South African Retirement Annuity fund!   An invalid reason would be probably be to do it for tax purposes!  ( and there is a ton of misinformation being spread by migration agencies in this regard).

 

But if you would like to do it for tax reasons, and based on the information that you have provided above, you have no need to.   The South African Income tax act (and the DTA between Australia and South Africa) would see you as a Australian resident.    

In the situation described above, don't waste your time and money on a financial emigration........

 
@XXXXXI was just reading this and was wondering, for the invalid reason, are you referring to the new tax expat law that is coming into play in 2020? I'm trying to find out if this is something to be concerned about and if we need to financially emigrate.

[XXXXX]

On 10/2/2019 at 12:26 AM, Mauro said:

 
@XXXXXI was just reading this and was wondering, for the invalid reason, are you referring to the new tax expat law that is coming into play in 2020? I'm trying to find out if this is something to be concerned about and if we need to financially emigrate.

Yes.  I am referring to the so called "expat law" coming in to effect......   The effect of the law can be complex - and if necessary I encourage you to engage with a genuine tax consultant and not migration agencies hard selling financial immigration as a solution - which incidentally they will offer to perform for a fee.

 

In summary - the new so called "expat law" will only affect 1) Genuine South African tax residents who are 2) temporarily working offshore in jurisdictions where  3) a relevant double tax agreement doesn't apply and 4) where the offshore tax rate is lower than South Africa's rate and 5) where you are earning more than R1m a year........

 

All 5 criteria have to apply in order for you to be negatively affected by the new law. ......  (something that migration agencies fail to mention).........  You compliance obligations however may increase.

 

Migration agencies concentrate on my point 2, where I refer to temporarily working offshore.  Financial immigration is a indicator, albeit a strong indicator on intent to permanently move off shore - it is however not conclusive and/or required.  SARS has issued a interpretation note on this issue, and a couple of things can be noted in this interpretation note.

1 - They emphasize that financial immigration should NOT be confused with tax residency and/or citizenship.  and

2 - Financial immigration is noted as being only one of at least 13 indicators on intention to permanently relocate.  It is not required, nor is it conclusive........

I suggest you run your eyes over the interpretation note - it can be found here.  https://www.sars.gov.za/AllDocs/LegalDoclib/Notes/LAPD-IntR-IN-2012-03 - Resident definition natural person ordinarily resident.pdf

 

In summary - to the extent that you can prove that you have permanently emigrated or relocated with no intention to return to SA (in substance and form) you will not be seen to be a SA tax resident for tax purposes. (Have a look at para 4.2 in the interpretation note I was referring to).  You do not need to financially immigrate to achieve this.........

 

In the interests of disclosure, I have also recently performed a financial immigration - intent was to purely to access a South African retirement annuity and NOT for tax purposes.   I obtained quotes from various sources on doing the financial immigration and that varied (depending on the services performed) from R800 to R25 000.     At the end of the day - I pretty much did it myself  and only used a bank for the actually application itself (which you essentially have to do).   It cost me just under R1k.  This option might not suite everyone though.

 

 

 

 

 

[Yvonne]

Thank you so much for this very helpful post. Your steps helped me to do my financial migration mostly on my own. I did have to use a SA accountant to help me get my TCC from SARS due to inactive accounts. Your tip about sending docs to a family member instead of to the bank directly was particularly helpful. My FIL dropped the documents to a local ABSA branch who then forwarded it to ABSA towers swiftly. A very arduous process which I am so grateful to have completed. 

[bosmans]

Would a married couple do just one financial emigration 336b form between the two of them? Or would each person have to go through the process to individually to get their retirement annuity paid out in a combined overseas account?

[CyberJoe]

Well, time to bite the bullet and get this done. SARS is definitely coming for more!

https://businesstech.co.za/news/wealth/422650/government-moving-to-hold-onto-south-africans-retirement-funds-legal-expert/

[Erik]

Well here we are, one year later and I've finally gotten my behind in gear and am trying to financially emigrate.

A year ago I contacted ABSA jhbnonreshub to find out about emigration. They quoted R2500 to do it (set up blocked account and do SARB stuff). I wasted another year and finally sent all the forms electronically to them in August this year to check before sending originals by courier. It's been three weeks and no reply. Not sure if COVID has anything to do with it, but it seems like an awful long time just to check whether I have the right forms.  

[FingersCrossed]

Hi @Erik

 

I am also doing the financial emigration but with Sable International. Busy going through the documentation now and trying to organise a certified copy of my passport, Aus Visa and SA ID. Oh and I have to do a selfie holding my SA ID with the ID number clear...that should be fun.

 

I really hope that the process doesn't take to long once everything is through.

 

Please Let us know how your process goes.

[Erik]

On 9/10/2020 at 11:05 AM, FingersCrossed said:

Hi @Erik

 

I am also doing the financial emigration but with Sable International. Busy going through the documentation now and trying to organise a certified copy of my passport, Aus Visa and SA ID. Oh and I have to do a selfie holding my SA ID with the ID number clear...that should be fun.

 

I really hope that the process doesn't take to long once everything is through.

 

Please Let us know how your process goes.

They sound expensive. We only have about R50k left in RSA and it's really not worth it for us to use someone who's going to charge us R30k to do it. No reply from ABSA yet. Might try one of the other banks, ABSA has always been pretty pathetic.

[XXXXX]

On 9/15/2020 at 11:14 AM, Erik said:

They sound expensive. We only have about R50k left in RSA and it's really not worth it for us to use someone who's going to charge us R30k to do it. No reply from ABSA yet. Might try one of the other banks, ABSA has always been pretty pathetic.

If you're financially literate, you can do it yourself.  Tedious, but not impossible.   Cost me about R1200 - only unavoidable cost is the actual application to a bank (can't be avoided).

[XXXXX]

ps.  forgot to mention - wait 6 months or so.  And it won't be necessary to do a financial emigration to draw a RA.  Only requirement (although paperwork still needs to be confirmed) is that you're a genuine non-SA resident for tax purposes for 3 years

Edited September 19, 2020 by XXXXX
Correction

[JJV]

On 9/19/2020 at 1:52 PM, XXXXX said:

ps.  forgot to mention - wait 6 months or so.  And it won't be necessary to do a financial emigration to draw a RA.  Only requirement (although paperwork still needs to be confirmed) is that you're a genuine non-SA resident for tax purposes for 3 years

I suppose you refer to the Draft Tax Amendment Bill published on 31 July.  In there the definition of "retirement annuity fund" reads "is a person who is [or was] not resident [who emigrated from the Republic and that emigration is recognised by the South African Reserve Bank for purposes of exchange control] for an uninterrupted period of three years or longer".

 

My reading of that is that that formal emigration is still a requirement where a resident leaving South Africa wishes to commute his/her interest in a retirement annuity fund in full prior to his/her retirement date [from the fund].  When the proposed amendment comes into effect it would add an additional wait period of three years.

[XXXXX]

On 9/22/2020 at 8:38 PM, JJV said:

I suppose you refer to the Draft Tax Amendment Bill published on 31 July.  In there the definition of "retirement annuity fund" reads "is a person who is [or was] not resident [who emigrated from the Republic and that emigration is recognised by the South African Reserve Bank for purposes of exchange control] for an uninterrupted period of three years or longer".

 

My reading of that is that that formal emigration is still a requirement where a resident leaving South Africa wishes to commute his/her interest in a retirement annuity fund in full prior to his/her retirement date [from the fund].  When the proposed amendment comes into effect it would add an additional wait period of three years.

Yep.  I'm referring to the same amendment bill - but your interpretation is incorrect.   If you are extracting from the bill itself, you need to consider he existing legislation and general explanatory note prefacing the amendment bill.   The explanatory note reads 

 

[ ] Words in bold type in square brackets indicate omissions from existing enactments.

______ Words underlined with a solid line indicate insertions in existing enactments.

 

Essentially the words in square brackets is the words to be deleted from existing legislation, and replaced with the underlined words.  I.e. the revised legislation (once the bill is passed into law) will read.  "

 

"......is a person who is not a resident for an uninterrupted period of three years or longer"

 

You might also want to cast your eye over the explanatory memorandum (released with the bill) which reads a follows.  (my bolding)

 

1.4 WITHDRAWING RETIREMENT FUNDS UPON EMIGRATION

[Applicable provisions: Section 1 of the Act, the definitions of “Pension Preservation Fund”, “Provident Preservation Fund” and “Retirement Annuity Fund”]

I. Background

Currently, the definitions of “pension preservation fund”, “provident preservation fund” and “retirement annuity fund” in section 1 of the Act make provision for a payment of lump sum benefits when a member of a pension preservation, provident preservation or retirement annuity fund withdraws from the retirement fund due to that member emigrating from South Africa, and such emigration is recognised by the South African Reserve Bank (SARB) for exchange control purposes.

II. Reasons for change

As outlined in Annexure E of the 2020 Budget Review, Government will be modernising the foreign exchange control system. As a result, a new capital flow management system will be put in place. This new system will move from a “negative list” system to one where all foreign-currency transactions, other than those contained on the risk-based list of capital flow measures, being allowed.

In respect of individuals, one of the changes to be implemented during modernisation of the foreign exchange control system is the phasing out of the concept of “emigration” for exchange control purposes. The phasing out of this concept will have a direct impact on the application of the tax rules as the tax legislation makes provision for a payment of lump sum benefits when a member emigrates from South Africa and such emigration is recognised by the SARB for exchange control purposes.

III. Proposal

In order to ensure efficient application of the tax legislation, it is proposed that the definitions of “pension preservation fund”, provident preservation fund and “retirement annuity fund” in section 1 of the Act be amended to remove the reference to payment of lump sum benefits when a member emigrates from South Africa and such emigration is recognised by the SARB for exchange control purposes. As such, a new test should be inserted which will make provision for the payment of lump sum benefits when a member ceases to be a South African tax resident (as defined in the Act), and such member has remained non-tax resident for at least three consecutive years or longer.

IV. Effective date

The proposed amendments will come into operation on 1 March 2021.