Sign in to follow this  
Harry

What About Our Money in South Africa!!

Recommended Posts

Harry

What About Our Money in South Africa!!

This issue comes up regularly and is a major concern. For younger folks, with their entire lives ahead of them, this issue may not be very important. For folks heading over 40, this can be a showstopper. For folks over 50 it can be an abject nightmare. For some it kills the entire idea of moving to another country.

Rather than keep it in the shadows, where it festers or "grows hair", I thought there might be merit to putting the issue where it can be seen. I do know that I get a lot of questions about it.

While SACanada has NO interest in discussing methods and techniques that go counter to the regulations of the South African Reserve Bank, the folks that post on this forum do have a right to discuss this aspect of the emigration experience for decent hard-working South Africans.

A large number of Canadians that I met upon my arrival in Vancouver knew about this problem that South Africans have. Most are very vocal in their condemnation of the control measures. Some banks here even specifically focus on South Africans because they are seen as a good client base, despite having been stripped of so much of their hard-earned money.

I therefore thought I'd kick off with a summary of the present 2004 rules of the SA Reserve Bank as they relate to emigration. In this process I do not profess any special expertise, other than having been through the process as one of the people affected by these measures. I trust that others with more experience will build on it.

Share this post


Link to post
Share on other sites
Harry

The Rules of the SA Reserve Bank*

I believe the rules depend on two factors:

a] whether or not one is a SA resident for tax purposes ( see here.)

b] whether or not one has formally emigrated.

I'm sure citizenship must play a role somehow, but I have no insight on the matter. I cannot believe that the SA government can apply the same financial rules to non-citizens that it applies to its own.

The SARS holds that one is an SA resident for taxpaying purposes when:

"1. One has spent, during the current tax year as well as during each of the previous three years, more than 91 days per tax year in South Africa AND

2. One has spent during the previous three tax years in aggregate more than 549 days in South Africa"

Note that the Canadian and SA tax years do not correspond. This makes for interesting calculations of some detail.

Situation 1: You are a resident taxpayer in SA

You may invest R750,000 per TAXPAYER overseas EVER. This means R1,500,000 per TYPICAL family.The key here is the word TAXPAYER. To make such investments you have to have tax clearance, basically testifying that you have paid all your taxes. The investing bank usually will do that for you to get the benefit of your business. You may also (as SA resident) pay for things internationally over the internet, with a transaction limit of R20,000.

People in this situation are also allowed a travelling allowance of R160,000 per annum per adult traveller and R50,000 per travelling child under 12. You are supposed to bring back to SA any money not used. Every traveller may also additionally take R5000 in SA banknotes. Anything you buy overseas on your credit card is seen as part of the R160,000. To put someone else’s allowance on your credit card, you have to get special Reserve Bank permission. Many people take the bulk of the R160,000 as traveller's cheques or bank drafts. At one point, one had to fill in special Reserve Bank forms if one tried to buy traveller's cheques of more than R50,000 at one time and place. You can imgaine what people did to get around that.

Folks going overseas temporarily (which is what the authorities understand you to be doing in this situation) are allowed to take out of the country R1M worth of household effects plus their travel allowance.

The main problem when you are in this category, is that you cannot really get SA pensions paid out to you formally/legally in a non-SA country. This is clearly a big problem for older people who have spent a lifetime saving their pennies in SA. Most younger folks that I know try to retain this status as long as they can. The reason for that becomes clear below

Situation 2: You are an SA citizen and have taken up permanent residence overseas (most folks here).

This situation interests older people with money in policies and annuities and things in SA. They may be nearing retirement or have retired...or they have to start thinking about it seriously.

While the banks (and thereby the reserve bank) all seem to expect you to clear your financial emigration with them BEFORE leaving the country for foreign physical residence, few people actually do. If you DO declare your emigration intentions, all kinds of shutters come down on you: You have to surrender all your bank accounts, financial instruments and investment certificates and they demand to have and destroy any existing credit cards. They basically take total control of all your SA finances and you have to do any financial transaction through that bank. Before actually clearing you in this way, they ensure with the SARS that you have zero outstanding tax responsibilities.

You are not supposed to use your SA credit cards at all once you have taken up foreign residence ( As opposed to just visiting or on short contract). Many people do. I consulted with a bank before coming here, and they were absolutely adamant about the cards being off-limits as soon as it was clear that you had taken up residence outside SA. They also told me it is the ONE thing the reserve bank CAN and DOES monitor.

When you no longer conform to the requirements for being an SA resident for tax purposes, you are not liable to SARS for the international portion of your income. You remain subject to SA tax for SA-based income. This appears roughly in line with international treaty, which holds that the country of residence gets to have the tax on international income.

When you emigrate you are allowed a "Settling in allowance" of R1,500,000 per FAMILY UNIT ( I have not seen "Family Unit" defined), irrespective of the number of taxpayers. You are also allowed to take out of SA something like R1,000,000 in Household Effects. These rules may have changed a bit recently. Note that any earlier overseas investment is subtracted from the R1,500,000. On top of this the travelling allowances would also apply.

This stuff I list here can all be found here. That webpage works a bit wierdly and does not seem to allow one to link to it consistently. The best is to go to www.reservebank.co.za and follow the following chain: Home > SARB activities > Exchange controls > Exchange control publications. Download document "Section T" from that SA Reserve Bank site. The entire set of documents is also available as a zipfile. It works just fine. In it you can find everything I have posted here.

By the latest rules, one may apply for the transfer to overseas of monies in excess of the above figures. It is subject to Reserve Bank discretion and one has to pay them 10% of the amount ( see section 6.2.5.4 of the Reserve Bank document)This certainly is a new rule.

For visits back to SA you can have R70,000 freed up of your own SA money for travel in SA per year per traveller but calculated at R3000 per day per adult traveller and R1500 per child under 12. The bank has control over issueing the money, they are supposed to force you to return any unused balance.

When you have this status, the following holds as regards annuities:

1. For annuities started more than 5 years before you emigrated the bank may apply for the right to pay out all the capital when it comes free. This certainly seems to be a new rule. I hope I understand it right. Read it for yourself in the download document..the very last paragraph 6.2.5.15.

2. For annuities started less than 5 years before emigration, the bank may pay you any INCOME FROM your trapped annuity in the foreign country, but they may NOT move any capital of that annuitiy overseas.

You remain taxable in SA on these proceeds, as it is SA income.

Ironically, if you die, and you have left your estate to a beneficiary overseas, it will be sent to that person (presumably after estate tax has been deducted where applicable)...: Download the document HERE to see for yourself

------------------------

I hope all the above helps to some degree with all the tough financial stuff. I suggest folks download those Reserve Bank documents and keep them at hand. The two highlighted new rules certainly give some room for hope for the folks that have funds trapped in South Africa. It would be good to know the experience that folks have had trying to make use of those rules.

Edited by Harry

Share this post


Link to post
Share on other sites
Pierre

Another thing to remember for prospective emigrants is that money you liquidate in SA from policies are taxed at your marginal tax rate. However if you wait two years and have not had a taxable income in SA then the level of taxation that applies to liquidated money drops down to the lowest level. Currently around 18%.

So hanging on for a while may save you in the order of 27% tax on the money.

Also if in your opinion the SA funds are going to depreciate by this amount or more against the dollar, then it makes no sense to keep it in SA currency.

Share this post


Link to post
Share on other sites
Pierre

If you leave your money in SA it is worthless, and if you bring it to Canada it is worth less.

Share this post


Link to post
Share on other sites
Harry

Pierre,

as long as we can keep our sense of humour, we'll be OK. I have to confess I was so outraged and disgusted with the situation in SA when we packed up, that I did not always make the best possible decisions. Your comment about separating the pension payout in time from a full year's salary is a wise one, provided that one actually has the scope and means to get the money out of SA after that delay. All kinds of people tried to talk me into re-investing my pension at the time, but I was in no mood to listen to anyone that tried to tell me it was wise to put money in SA....just simply too much trauma.

Edited by Harry

Share this post


Link to post
Share on other sites
LynetteH

Pierre.

I have a question about your comment on the timing of pension payouts:

Does one have to wait 2 years, or can one simply wait until the beginning of the first tax year in which you do not have any regular income?

So in other words if I received my last salary in March of a given year, and then cashed in my pension in May of that year (this being a new tax year) what tax rate would I pay?

thank you

LynetteH

Share this post


Link to post
Share on other sites
Pierre

Lynette I understand the rule is if you did not earn an income in SA for two years, meaning tax years in SA, then you default to the lowest level of taxation.

In the scenario where you earned a salary in March of say 2004, it would count as income in 2004/5 tax year. Money that you receive in that same year would be taxed at the rate for normal tax, ie your normal marginal tax rate which is usually around 45%. If you leave the money in a preservation fund for two years you would only pay the 18% tax even though the amount you receive in that year may have put you in a high income bracket.

This is my rough understanding. Getting that money out of the country is also not a problem if you are still a SA citizen with foreign PR. You need tax clearance and reserve bank clearance. These clearances can be arranged beforehand or can be done remotely via your bank. I got Standard bank to fax me the forms to Canada but you have to mail it by snail mail back since they require an original signature on the documents.

I hope this helps.

btw I got a growth of 9% on money left in SA over the two years plus I left it there. Growth in Canada is not usually as good for a conservative type investment. The big problem/risk is the value of the Rand. If the Rand loses more than 9% in value against the Canadian Dollar for example, then you make a loss by leaving it in SA, but you save on the amount of tax deducted in SA.

Share this post


Link to post
Share on other sites
JJKruger

Does someone know whether pension in SA paid out in Canada will be subtracted from the 750,000 per person?

This feels a bit unfair.

Share this post


Link to post
Share on other sites
Harry

It depends on what you mean by "pension":

If you mean the monthly retirement pension payment from a retirement pension fund, then that can be paid out in SA and transferred to Canada, provided the pension is from a registered pension fund.

If you mean a pension that you have been contributing to and which is being "paid out or cashed out" as a "lump sum", then the lump sum CANNOT be added on top of the R750,000...it is part of it. At least, that is how I understand it. In short, you can take out the monthly amounts but not the capital.

Essentially the interest on capital can be paid out, while the capital forms part of the R750,000. In the same way, dividends on investments may be paid out. Also, read again the bit about annuities. It would appear that, if you started the annuity more than 5 years before emigration, everything in the annuity can be taken out of the country (subject to apllication to the gvt). If you started it LESS than 5 years before leaving, then you can take out only the "Income portion" but not the capital. The capital becomes part of your R750,000.

The new rules allow you to apply to the Reserve Bank to take out more than R750,000. IF THEY APPROVE IT, then you can remove that excess from SA, after giving them 10% of it. I do not know anyone that knows on what basis they approve or reject requests nor do I know any humans that can vouch for that process.

No...of course it is not fair.

Interestingly, you may make a donation or give a gift of R100,000 per annum to an SA resident from your blocked funds. I do not know how much tax the recipient would pay on that gift or donation.

Edited by Harry

Share this post


Link to post
Share on other sites
thelategans

Each adult South African can also make an annual donation of R 30 000 to a "foreigner" in another country. As long as the draft is not made out to yourself. With a bit of creativity you could get a substantial amount of money out (legally) while you wait your visas to come through. Anther way (legal) is to use your lsd trip to take your allowance out.

Stuart

Share this post


Link to post
Share on other sites
Harry

Stuart,

strictly speaking, one is supposed to return to SA that portion of one's travel allowance that has not been used. So it is against Reserve Bank regulations to use your allowance to willfully remove money from the country for anything other than your actual travel and travel expenses.

Where did you find the info about the R30,000?....I cannot get it on the Reserve Bank regulation site :(

Share this post


Link to post
Share on other sites
LynetteH

Harry

I have utilitsed the R30,000 allowance to foreigners. I was told about it by my bank in SA (ABSA). I believe that it is supposed to be for gifts and donations, although I used it to pay the rental deposit on my USA apartment before I left South Africa.

I believe the transaction has to be cleared by the reserve bank to ensure that you do no go over the R30,000 per year allowance. My bank sent this paperwork to the reserve bank for me. Apart from that it was a relatively simple proceedure and only took a few days.

Have a great weekend

Cheers

Lynette

Share this post


Link to post
Share on other sites
Harry

Thanks for that Lynette,

I was about to comment in the earlier post that it is just about the right figure for the deposit on a big capital purchase here. I'll keep seraching to find it in the words of the REserve Bank itself. It is always good to be able to quote their own rules at government officials.

Share this post


Link to post
Share on other sites
thelategans

Yea Harry, I was also advised by my bank and as a matter of fact, they encouraged me to use that method as a means to move money to a foreign destination. The so called clearance is a formality and is not actually approved by the Reserve bank, but merely reported to the bank along with millions of other reports that they receive weekly from all banks and institutions that have to report to the Reserve bank(and then filed!)

As far as the travel allowance is concerned, I have no intention of taking any issues with you here, suffice to say that how your money is spent does lend itself to a fairly broad interpretation (condoned by the RB).

Stuart

Share this post


Link to post
Share on other sites
Harry

The Financial Intelligence Centre Act (FICA)

This is the act that has everyone, but mostly the banks, running about in square circles trying to prove the ID of their clients. This is essentially an anti-money-laundering measure. One cannot argue with the positive principle thereof. Already, in Britain, it is near-impossible to open any bank account without detailed proof of residence...usually a water & lights bill with your address.

Of course, the problem for many South Africans abroad is that the FICA forces them to prove their residence status, against their will. The regulations of the SA Treasury, as issued to Banks, may be found HERE.

It should be noted that the pressure is actually on "accountable institutions", namely the banks, lawyers and estate agents. They are the ones that have to ensure that they have the right information. This puts them in an akward spot where they run the risk of annoying good clients, so they will be very careful. See the comments of the Banking Council below.

Nevertheless, for those who have left contact addresses with their family in SA, it would be good to get their family to understand that letters from the bank are really important documents for the next while, as the banks may be trying hard to ensure you are who and where you say your are in their records.

1. Which clients are affected?

Everyone, except for the following. A Bank does NOT have to confirm the required details if the account/client/transaction meets the following criteria ( I don't think this helps much):

1. If the account holder cannot withdraw more than R15,000 in 24 hours,electronically or otherwise.

2. If the positive balance on the account is limited to being below R25,000

3. Money may cannot be transferred out of SA from that account

4. The account does not accept deposits of R20,000 or more, or more than one R5,000 deposit per month (for this purpose a number of deposits over 24 hours count as one deposit)

...as long as the account has NOT been dormant for more than 6 months. That is, if it has been dormant for 6 months they have to check the ID. You may not have more than one such account with that bank without being ID'ed.

2. What Info is to be provided if the accounts are outside these limits?

1. The person's Identity has to be verified aginst an SA ID card/book ( photo, full names, Date of Birth, ID number)

2. The person's income tax registration number must be checked

3. The person's residential address must be verified by "reasonable practical means" ( read: water & lights bill)

3. What if you are not in SA?

I find two bits in the major document that address this. They differ slightly, but here is what they say in regular English:

1. If you are an SA Citizen living in a country that has anti-money-laundering controls ( I presume Canada is acceptable!!?) then the info may be collected and forwarded by an equivalent "accountable institution" (read : Your Canadian bank or lawyer)

2. Elsewhere it says:

"Verification in absence of contact person:

"If an accountable institution obtained information in terms of these regulations about a natural or legal person [ like a company], partnership or trust without contact in person with that natural person, or with a representitive of the legal person or trust, the institution must take reasonable steps to establish the existence or to establish or verify the identity of that natural or legal person, partnership or trust, taking into account any guidance notes concerning the verification of identities which may apply to that institution."...I reckon the banks will opt for this clause.

4. What else to do?

I believe that you can give another party in SA power of attorney and that should make things a lot easier.

5. Who to rant against?

The USA in this case, please. They pushed for it to control terrorist money. I think SA is just complying with this pressure.

Edited by Harry

Share this post


Link to post
Share on other sites
Theuna

Baie baie dankie Harry for this useful information and also for taking the time to research it and compile it!

Share this post


Link to post
Share on other sites
vinceb

A question re the R160,000 allowance for foreign travel:

We will be going back to SA on a visit at the end of the year - we have applied for PR but I am in Canada as a skilled worker. I have never formally emigrated, but have taken out the maximum allowed - I know that I am allowed to take out R160,000 per person when I can show a flight ticket and passport - but does that also apply if the ticket has been bought in Canada and not in South Africa ?

Thx,

Share this post


Link to post
Share on other sites
thelategans

Vinceb, you will have a problem. I checked with 3 foreign exchange companies when I left and they all said no. You should consider "buying" a ticket that can be cancelled (once in SA) and the cancel it after you have made your purchase, or buy a cheap ticket to Zim or one of the African countries. Also consider sending a donation to family or friends in Canada, from SA.

Stuart

Share this post


Link to post
Share on other sites
Seanhay

Hi Vince and Stuart,

You're right Stuart, the ticket must be issued in South Africa for the travell allowance to be paid out. ie. the flight must be from SA outbound and back again (not vice versa) - a friendly lady at Standard Bank stressed this to me for any future trips I may undertake... In addition to this you are now required to supply proof of local residence in SA (rate and taxes or electricity bill) - this is a stipulation from SARB but when I went to the Bank 3 weeks ago it wasn't enforced. This could pose future problems for anyone wishing to travel to SA annually to take out their travel allowances....

The tax amnesty will pose interesting challenges for SARB shortly.

Look at this theoretical case.....Both Fanie and Koos are wealthy SAFricans living in South Africa.

Each have R3 million they have invested. Fanie stuck to the letter of the law and only used his R750 000 allowance offshore. The remainder he kept in SA. Koos on the other hand bucked the system and took all of his R3 million off-shore illegally!

Now Koos has come clean in the amnesty deal - he has got a smack on the wrist from SARB, paid the 10% to SARB and get's to keep his R3 million offshore.

Fanie can take serious issue with this as he has been a good citizen and why must he be penalised indefinately into the future...Surely SARB would have to offer him the same terms i.e. charge him10% and allow him to take the remainder of the R3 million offshore too if he so wishes....

Watch for some intersting developments in SA exchange control once the 'behind the scenes' amnesty process finishes off toward the end of the year... :rolleyes:

Share this post


Link to post
Share on other sites
vinceb

Hi Stuart and Seanhay,

Thanks for the information, I will have to structure it differently next time.

Share this post


Link to post
Share on other sites
Guest lindaR

We made use of an emigration consultant to get our application in (have been here in Canada for almost 4 years now) and at the time we were advised that if we stood to inherit ANYthing we would do well to formally emigrate, as no inheritance would be payable to us in Canada had we just slipped out quietly - can anyone confirm this info ??

Share this post


Link to post
Share on other sites
Harry

Linda, That's correct. You can read that in my original post , 2nd from the top of this thread: HERE

Share this post


Link to post
Share on other sites
Charles

I can also confirm that.

I am having untold trouble with banks in SA over my Mothers will.

I am not sure if it is just inefficiancy but I have been asked four times now to prove my Citizenship and that I formally emigrated.

I am still tryingto figure out what part of the Canadian Passport and Citizenship card is hard to fathom out!I believe that the Reserve Bank or some other authority has to have proof that you legally emigrated before you can be paid out.

Share this post


Link to post
Share on other sites
Hendie

We have heard from friends, and have experienced this ourselves in dealing with banks in South Africa:

From June 30, 2004 your bank must have certified copies of an identity document (SAID or passport), as well as some utility account (bill) that affrims the address that they have for you to enable you to retain your bank accounts. Any accounts not so identified after June 30th will be closed, and the funds confiscated.

Maybe others can bear this out as well ?

Articles:

Hendie - I see now this has been discussed already, so I pasted my comments at the end of Harry's thread on the same matter

Share this post


Link to post
Share on other sites
Chubs

Hendie,

We received letters from First National stating we had to come in with ID and utility bills so you are very correct.

Bit unfare I think. What about the South Africans touring Europe and living in London on working visas besides those of you who are living else where. You come back and your accounts are gone. There isnt much hype about it though. Just a little letter in the box.

Simon

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Sign in to follow this