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By David Thomson, 12 December 2017
David Thomson, Senior Legal Adviser at Sanlam Trust explains that relocation means moving to a foreign country – usually for work purposes – without permanently exporting your assets. Emigration means moving permanently to another country, taking as many of your assets with you as you wish, and as exchange controls allow. Emigration is a South African Reserve Bank (SARB) process and it has tax and citizenship implications. With relocation, a number of factors will determine your tax implications. Consulting a licensed
financial planner could help you make an informed decision.
“We generally advise people to think seriously about whether they really want to emigrate. Younger people, who may not have many assets, are often better off relocating and not emigrating. Even if they do have large sums to export, they can do so using the annual foreign exchange allowances.”
Thomson explains that individuals in good standing with SARS can currently invest up to R10 million abroad per annum. This gives them the option to seamlessly return to South Africa at a later stage. They can leave the income and capital they earned abroad by making use of the allowances; and they can begin or resume their careers in South Africa without the hassle of immigrating back to SA.
“However, if you have not emigrated, you remain liable for SA income tax on your worldwide earnings. SA has double taxation treaties with many countries, but not all. If you do not intend to return to SA it is advisable to emigrate and not just relocate to avoid being taxed twice.”
Thomson says the main reason for deciding to emigrate could be a need to take large sums of capital offshore in a short space of time – for example to retire overseas since you’ll need to buy property and provide for pension. You will then have to go through the proper SARB emigration procedures and obtain tax clearance from SARS.
“Whatever your decision, you should make a point of discussing it with your financial planner to ensure that your finances are in order. For example, you may not be able to obtain life and disability cover in your adopted country – or it may be prohibitively expensive. In such instances you will do well to ensure that you have sufficient funds in a South African bank account in order to pay your policy premiums. All your risk policies at Sanlam remain intact if you retain a South African bank account and if you comply with the policy terms and conditions. It is also important to note that returns on investments (in particular cash) are significantly lower in developed countries than in SA. For example in the UK you can expect 0.25% p.a. on bank deposits.”
Importantly, Thomson adds that you should execute a last will and testament in your new country of residence to make sure you comply with the law in that jurisdiction. If you retain assets in South Africa, you can also execute a local will. But if you do, clearly state that the local will only relates to your SA assets and make sure your overseas will clearly excludes your SA property and does not contain a blanket revocation clause.
Other factors to consider if you plan to emigrate: