More people are taking their money out of South Africa â€` what you should know
Source: iol, 15/02/2021
Depending on why you are taking money offshore, Powell said that there are a range of considerations that you need to look at review the following before you go ahead.
As a starting point, Powell suggests you think about key questions such as:
â€˘ How much money can you transfer?
â€˘ Do you need to open a foreign bank account?
â€˘ Where will the money be invested?
â€˘ Can you leave your South African bank account open?
â€˘ If you emigrate, what do you do with any assets left behind e.g. rental property, shares, retirement annuities?
In terms of SARB exchange control, South Africa residents are entitled to two annual allowances:
â€˘ R1 million Discretionary Allowance (DA) â€` this can be used for travel, gifts, study, alimony and foreign investment without having to apply for tax clearance
â€˘ R10 million Foreign Investment Allowance (FIA) â€` requires tax clearance for foreign investment
â€śThe R1 million DA and R10 million FIA allowances run from 1 January to 31 December,â€ť said Powell.
â€śTax clearance applications for foreign investment have been taking longer than normal with Covid, so it is advisable to get applications in as soon as possible. Also, from mid-December SARS tend to go on skeleton staff and the probability of getting approval gets lower the later one leaves their application.â€ť
â€śEven if you have used your 2020 allowances itâ€™s a great time to get tax clearance and make sure that as early as the first week of January 2021 you can then start utilising your 2021 allowances.â€ť
Powell said that there are generally three types of circumstances in which South Africans will be taking money offshore:
South Africans living in the country are allowed to have offshore bank accounts and invest offshore. I am still amazed at how many clients still think this isnâ€™t legal, said Powell.
â€śEstablishing an offshore bank account is a relatively straightforward process.We can easily open offshore accounts in the Channel Islands that can be Pound, Dollar or Euro denominated. We can also open some onshore EU accounts.
â€śMany people wanting to invest offshore may have waited this year to see if there has been any recovery in the Rand after the volatile year we have had ,and now urgently need to put in their applications to make this yearâ€™sallowance cut-off.â€ť
For those investing offshore, people often choose to use their bank to move the money, where it may be more cost-effective to use a forex broker, said Powell.
There are those emigrating who are inevitably selling their homes and liquidating assets, said Powell.
He said that those planning to emigrate and move their investments, should obtain a professional assessment of their personal circumstances, specifically considering:
â€˘ Investment allowances
â€˘ SARS tax clearance applications for foreign investment
â€˘ Emigrating and the cross-border tax implications
â€˘ Maintaining bank accounts in SA
â€śIf you leave South AFrica as a family unit (e.g. husband and wife), you would have a R22 million allowance in the year of departure that you could transfer, plus further annual allowances for your children dependent on their ages,â€ť he said.
Powell said that some may need to consider financial emigration if they wish to access their retirement annuity savings.
â€śIt can be a confusing time with all the exchange control rules and the banks are quick to suggest that you financially emigrate. This would require you to complete a form called an MP336 and to close your bank accounts in South Africa, transferring everything into a blocked rand account.
â€śHowever, financial emigration is only required in specific circumstances, and you should obtain professional advice from migration specialists before taking any drastic steps,â€ť he said.
He said that other South Africans may need to consider tax emigration. However, he warned that this is a complex process and each situation needs to be individually assessed.
Investing in Plan B
Powell said that there are also a group of investors staying in South Africa, but looking for a plan B, effectively looking at â€śinvestment migrationâ€ť.
â€śThese are generally high net worth individuals who have ability to invest in countries that have programs that enable residence or citizenship, such as Portugal, USA EB5, Malta or Montenegro,â€ť said Powell.