Unpacking financial emigration

Financial emigration, also known as formal emigration, is the process whereby a South African resident changes their status with the Reserve bank to that of a non-resident. One of the most important benefits of this is that retirement savings and annuities can be withdrawn and transferred offshore, even if the person is still under the age of 55. Another benefit, of particular interest to South Africans, is the protection that this offers from currency volatility.

Tim Mertens, chairman of the South African arm of the Sovereign Group, which provides trust and fiduciary services and pension products in Guernsey, the Isle of Man, Gibraltar and Malta, says that financial emigration has inherent benefits, like certain tax exemptions, but can also be fraught with tax-related, and other, risks if not done hand-in-hand with professional, respected service providers.

“When considering moving your assets off-shore, it’s critical that you explore the tax efficiency of the recommended structures. You need to understand their nature, including where they are domiciled and whether they are approved by a regulator, and the costs. You also need to understand how your money will be invested and whether the investment strategy will enable you to achieve your goals. The professionals who advise you must be knowledgeable about legislation in more than one jurisdiction, and the advice must take your overall financial circumstances, tax position and estate planning, into account.”

Mertens often advises clients asking about financial emigration to use their foreign investment allowance to contribute to an international retirement scheme that can generate future retirement benefits that can be paid anywhere in the world, including in South Africa, that would currently be considered a tax-free pension.

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MoneyMarketing February 5, 2018

FANews February 5, 2018