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income tax
South African individuals considering relocation share a common concern for the fate of their accumulated retirement savings. The “when” and “how” of accessing these funds and whether they will be subjected to taxation are often questioned. Given recent changes to income tax legislation, understanding the intricacies of withdrawing these savings has become increasingly important.

What Emigrating South Africans Should Know

The New Waiting Period: In the past, individuals relocating from South Africa could access their retirement savings immediately upon verifying their emigration status. However, as of March 2021, a new regulation stipulates a minimum three-year holding period before these savings can be fully withdrawn.
Proving Tax Non-Residency: An essential step for withdrawal involves the requirement of individuals to provide evidence of their non-resident tax status. This is typically achieved through a Notice of Non-Resident Tax Status issued by SARS. This notice certifies when an individual’s tax residency ceased, serving as a vital piece of documentation needed for the policyholder to process the withdrawal. Without this notice, the withdrawal process cannot begin.

The Possible Two-Pot System : The anticipated launch of the two-pot retirement system in March 2024 might introduce additional complexities for expatriates aiming to withdraw their retirement savings. Under this proposed framework, one-third of all retirement savings would be assigned to a savings “pot”, while the remaining two-thirds would be allocated to the retirement component.

Retirement holders will be able to execute a single taxable withdrawal annually from their savings pool, given that the balance has accumulated to a minimum of R2,000. This aims to cater to immediate emergency financial needs, offering early access to retirement funds.

A vested “pot” would encompass all retirement savings accumulated before the implementation of this system, and these funds would continue to be managed as they currently are, separate from the two-pot retirement system. The consequences of this system, along with its related tax implications, are largely undetermined at this point.

Refining Your Gameplan

Understanding the intricacies of the withdrawal process and income tax can significantly simplify your emigration process. It is crucial to have a clear and expert-led strategy for securing the necessary documentation to ensure a smooth transfer of retirement funds overseas.
The professionals at MMS Group are proficient in navigating the complexities and continuously evolving legislative changes that influence how these funds can be transferred. Should you need guidance in this area, our team is readily available to assist you. Feel free to get in touch.