The Expatriate Petition Group (“EPG”), who has an active membership of 15,000 South Africans abroad, recently conducted a survey to contextualise the proposed retirement fund changes from the perspective of South African expatriates, specifically in light of other recent legislative amendments.

Jean du Toit

Jean du Toit
Head of Tax Technical

Chris Nel

Chris Nel
Tax and Investment Specialist,
CFP® Professional

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The survey results showed that 75% indicated they still have retirement interests in South Africa; whilst 88% of the participants indicated that the amendment would have a negative impact on them personally, of which 64% stated that it will materially change their retirement planning.

According to Jean du Toit, Head of Tax Technical at Tax Consulting South Africa, “the survey provides clear evidence that many South Africans abroad still value the South African retirement investment offering, but that an unjust tax will cause them to seek greener pastures.”

Expatriates feel the pain once again

Tax Consulting South Africa recently made a submission to National Treasury, in the capacity of technical advisor to the Expatriate Petition Group, which considered the results of the EPG survey.

“The series of amendments that effectively targets expatriates, creates a negative narrative that this group of individuals have to operate within a system where there is no regard for their interests. Moreover, it gives credence to the belief that expatriates are singled out and that there is no certainty on what they may face in years to come. On this basis, we again caution that the proposal to apply an exit tax to retirement interests is counterintuitive to Government’s objective to keep the members of this segment of the tax base within the South African tax net”, their submission reads.

Jean concludes, “expatriates are again forced to make long-term decisions regarding their residency status.”

It’s not all doom and gloom

While there are options available to mitigate such a law change where there is upfront planning, the survey revealed that 70% of participants have not been informed on the practical impact of this change.

Chris Nel, Tax and Investment Specialist at Africorp Solutions, encourages taxpayers to have a more optimistic outlook while the dust settles around the draft bill changes.

“Many expatriates are unaware that they can backdate their financial emigration to before the three-year lock-in rule came into effect, given that they meet certain criteria. This means they can encash their retirement annuities or pension funds and then reinvest it in global financial vehicles that will be better suited for retirement in another country. However, if you are in the early phases of retirement planning, there is still time to prepare for the three-year lock-in rule, as well as the blow that the additional exit tax in the draft tax bill changes will have on your retirement savings.”

Expatriates who feel marooned in another country should take heed when making decisions. It’s always best to engage a specialist who can assist with structuring investments around a probable emigration, with the eye on finding a solution that will enable them to easily access their funds no matter where they choose to emigrate to.

“Financial decisions involve a delicate balancing of needs and risks. Since these decisions will not only impact you but also your loved ones, it should be made with the utmost care. It’s important to consult someone who can integrate financial or investment advice with tax planning, which will ensure that you remain compliant while restructuring your retirement plans,” concludes Nel.

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