Everyone strives to protect their assets as thoroughly as possible, but it’s essential to bear in mind that the Tax Man is always vigilant.

For South Africans who are moving abroad, it’s not just about packing and cutting ties with the South African Revenue Service (SARS). Terminating your South African tax residency to shield your global income from tax obligations in South Africa is a significant choice that comes with the stress of relocating and uncertainty about your assets.

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Worries about the status of your investments, properties, and policies can lead to sleepless nights, as the solutions are often intricate and depend on the specifics of each asset and circumstance.

This guide is designed to help expatriates navigate this complex process.

Capital vs Income: Understanding the Distinction

Effective planning starts with categorizing your assets into capital and income. This distinction is crucial for grasping how SARS and the South African Reserve Bank (SARB) evaluate them. Transactions such as property sales and lump-sum withdrawals from retirement accounts are considered capital, whereas earnings like rental income, dividends, or interest fall under income.

Furthermore, SARS will assess the source and compliance of your funds to ensure accurate reporting. Misclassification could result in audits or rejected applications to end tax residency, adding unnecessary stress to your move.

Offshore Transfers: Differentiating Capital from Income Funds

Keep in mind that the single discretionary allowance (SDA) of R1 million, which South African residents can transfer out of the country within a calendar year, is not available to non-tax residents. For them, all capital transfers to offshore accounts demand a SARS-approved international transfer (AIT) tax compliance status (TCS) PIN. Conversely, income offshore transfers do not require SARS or SARB approval for amounts under R10 million. An annual good standing TCS PIN will be required to confirm your tax compliance status once each year.

Additionally, expatriates are allowed to retain South African assets such as properties, investments, policies, and trusts until they choose to transfer proceeds offshore or as long as they wish.

Retirement and Pension Products

New regulations, introduced in March 2021, restrict access to retirement and pension funds. To withdraw these funds, individuals must remain non-residents for at least three consecutive years after cessation.

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Authorised dealers (banks) may ask for additional source verification documents before facilitating the transfer of these funds to an offshore account.

Inheritance Funds

Inheritance funds valued at less than R10 million can be transferred offshore without requiring approval from SARS and SARB once the estate is settled. Assets exceeding R10 million will require an AIT TCS PIN or a manual compliance letter if the individual is no longer registered with SARS.

Unlisted Shares

As a non-resident, the SARB will recognize unlisted local shares as non-resident assets. Proceeds can be transferred offshore without requiring an AIT TCS PIN from SARS or any approval from SARB. Additionally, dividends from these shares can be sent offshore without needing clearance.

Choosing to end tax residency and transferring funds can be daunting due to the multitude of legal and compliance issues. Seeking professional advice will ensure your transition abroad is smooth and mitigates unnecessary risks. Experts in expatriate tax and compliance can provide clarity, allowing you to concentrate on your new adventure while enjoying the benefits of the assets you have built over time.

Lovemore Ndlovu is the head of SARB engagement and expatriate compliance at Tax Consulting SA.

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