Towards the end of July 2020, National Treasury published the Draft Taxation Laws Amendment Bill, 2020. One of the proposals relates to an overhaul of the rule for taking retirement funds abroad.
In a parliamentary briefing last week, Treasury responded to the submissions on the new bills alongside the South African Revenue Service (SARS). It confirmed that it plans to change rules around financial emigration and the ability to withdraw one’s retirement funds, upon the conclusion thereof, replacing it with a new three-year lock-in period, according to various media reports.
“Over recent years, there has been a substantial increase of South Africans formalising their status as “non-resident” from both a tax and exchange control perspective, by using the financial emigration process,” Jonty Leon, legal manager for expatriate tax compliance at Tax Consulting South Africa explains.
As a result, many had decided to withdraw their retirement funds from South Africa and invest in a more stable economy. The change is set to be introduced from 1 March 2021.
Morne Bezuidenhout, director and investment planner at Netto Invest explains in Business Day. “The new provision amends the definitions under the current Income Tax Act as follows: people are allowed to withdraw their retirement funds where they “is (or was) not a resident who emigrated from the republic and that emigration is recognised by the SA Reserve Bank for purposes of exchange control for an uninterrupted period of three years or longer”.
Business Day also reports that the Treasury’s chief director of economic tax analysis Chris Axelson, said the Treasury agreed that those who had completed applications which had been received by the Reserve Bank before March 2021 would be finalised under the existing regime which does not place time restrictions on the withdrawal of retirement funds. “The condition however is that the applications must be approved by the bank, even if the approval occurs after 1 March.”
According to Treasury, one of the main objectives of the reform is to modernise the capital flow oversight system in a manner that balances the benefits and risks of more mobile people, financial flows and cross-border transactions.
Click here to read the Business Day article.
Click here to read a Moneyweb article.
Click here to view a Business Day TV interview with Piet Nel from the SA Institute of Tax Practitioners for more detail.
Click here to read the Tax Consulting article.