Policy Surrender
Maximizing tax benefits for expatriates
As South Africans explore opportunities abroad or settle in foreign countries, understanding the intricacies of tax obligations becomes paramount. Emigrating from South Africa opens the door to potential tax refunds and benefits, particularly concerning pension fund and retirement annuity tax refunds for expatriates. This page delves into the eligibility criteria, methods, and considerations surrounding policy surrender and tax refunds for South African expatriates.
Emigration and tax refunds
Emigration signifies the formal cessation of tax residency in South Africa, which can lead to certain tax benefits, including refunds. Expatriates must grasp the types of taxes eligible for refunds upon emigration, such as personal tax and policy tax. Policy surrender refers to the process of cashing in retirement annuities or pension funds, often triggered by emigration.
If you have already retired:
For individuals already receiving pension income from retirement savings, continuing to do so is necessary, even if residing abroad. The capital underlying retirement annuity savings is not transferable to another country, requiring the maintenance of a South African non-resident bank account for remittance of pension income abroad.
If you have not yet retired:
Upon undergoing tax emigration through the South African Reserve Bank, individuals become eligible to cash in retirement annuities early, even before reaching the age of 55, subject to tax and fund penalties. After SARS acknowledges the change in tax status from resident to non-resident, maintaining this status for at least three years is necessary before withdrawing retirement annuity funds. The lump sum withdrawal tax, typically around 30% of savings, and any early withdrawal penalties imposed by the fund are settled before transferring the remainder of retirement savings to a non-resident bank account in South Africa for remittance abroad. Once retirement annuities are withdrawn, savings can be utilised as desired, without reinvestment obligations in retirement savings vehicles in the new country of residence.
If you already live abroad but have not yet cashed in retirement annuities:
Completing the tax emigration process with SARS is essential to become eligible for full withdrawal of retirement annuity savings, even if emigration was formalised several years ago through the South African Reserve Bank. Fund managers now require a SARS Non-Resident Confirmation Letter to process the tax directive before fund withdrawal. The date of ceasing tax residency marks a departure from South Africa, eliminating the need to restart the three-year lock-in period. For individuals who left South Africa more than three years ago, immediate withdrawal of retirement annuities is likely feasible, provided all paperwork is in order and tax affairs are up to date.
How Evergration.com can assist
At Evergration.com, we specialise in facilitating policy surrender and maximising tax benefits for South African expatriates. Our services include:
- Tax emigration assistance: Navigating the tax emigration process with SARS to ensure eligibility for policy surrender and tax refunds.
- Document preparation: Gathering and preparing all necessary documents required for the application, including SARS Non-Resident Confirmation Letters and tax directives.
- Financial consultation: Providing personalised financial advice and guidance tailored to your specific situation and objectives.
- Fund management liaison: Coordinating with fund managers to expedite the policy surrender process and ensure compliance with regulatory requirements.
Our team of experienced professionals is dedicated to providing comprehensive support to facilitate your financial transition as a South African expatriate. Contact us today to learn more about how we can assist you in maximising tax benefits through policy surrender and emigration.