Can I Take My Retirement Money Out Of South Africa?
LEARNING OBJECTIVES
We’re passionate about providing high quality, relevant and up-to-date financial information to South African Expats around the world.
IN THIS ARTICLE, YOU WILL LEARN THE FOLLOWING:
How to withdraw your South African Retirement Annuity
The tests used to determine tax-residency
Important considerations for South African Expats
Best practise when taking financial advice
This article is intended for South African Expats.
Are you Leaving or have you already left South Africa? This guide will explore what you need to know about withdrawing your retirement savings.
Retirement savings form a large part of most South Africans investment portfolios when they end up leaving SA for greener pastures abroad.
There are however many misconceptions around what can and can’t be done when it comes to expatriating your money with you.
Understanding the implications of taxes and when money can be withdrawn will help you make informed decisions and better plan your finances.
Can I Withdraw My Pension Money If I Emigrate From South Africa?
The short answer is yes.
However, the issue will be largely determined by your personal circumstances but comes down to a couple of factors namely tax residency status, time spent as a tax non-resident and the product you are planning to withdraw from.
Tax Residency Status | Retirement Annuity Withdrawal
South Africa has a residency-based tax system meaning that if you are considered to be resident of SA you pay taxes on your worldwide earnings to SARS.
There are two ways in which SARS determines residency, the first is the concept as determined by common law and the second as it relates to the income tax act. In the common law sense the question is asked “where would the individual return after their worldwide travels?”.
Having a home, social interests like your immediate family and manner of continuity in a single place will all be considered.
In terms of the income tax act, there is a physical presence test. To meet the requirements of the physical presence test, you must be physically present in South Africa for a period or periods exceeding:
91 days in total during the year of assessment under consideration;
91 days in total during each of the five years of assessment preceding the year of assessment under consideration; and
915 days in total during those five preceding years of assessment.
In essence if you pass both tests for determining residency, you will be considered to be a non-resident for tax purposes.
Obtaining tax non-resident status requires an application process and a common misconception is that this automatically happens once you have been overseas for a period of time.
A successful application will result in you receiving a letter from SARS indicating the date from which you are considered a non-resident.
Transferring Your South African Retirement Annuity
You have to be a tax non-resident for a period of 3 consecutive years before you can withdraw the funds from your retirement savings. The clock on that 3 years starts ticking on the date indicated on the letter you would have received confirming your non-resident status.
It is important to understand that if you have been outside of South Africa for many years it is possible to apply for the non-residence status to be backdated to the date that you left the country.
Technically the above rules for withdrawals apply to all forms of retirement structures but there are some nuances.
If you have pension or provident preservation funds you are allowed one withdrawal from that structure before retirement. Withdrawal taxes will apply. In practice, most people take these withdrawals and pay the taxes before leaving SA.
Retirement annuities and preservation funds that withdrawals have been made from previously will be subject to the 3-period mentioned earlier. This 3-year period will also apply to preservation funds that no withdrawals have been made from in the past once you have left.
Financial Advice For South African Expats
Leaving South Africa and the implications it has on your retirement savings and picture is not a simple matter and there is a lot to consider. The reality is however that there is an ever-increasing number of us that have chosen to pursue a better life for our families abroad.
A trusted adviser can help you make sense of some of the financial issues so that you can make informed decisions best suited to your situation. If you would like to talk to someone that has walked down this road and can help you navigate it yourself, schedule a consultation using the button below, or contact me directly at adam@thewealthgenesis.com.
