How Important is the Emigration Tax Clearance Certificate?
If you want to emigrate, or have already moved abroad and want to complete the emigration process, you will need an emigration tax clearance certificate. This is a process whereby your tax status is changed by the Reserve Bank to indicate that you are no longer a resident in the country. It is imperative to also financially emigrate. Just because you now live in another country, it does not mean you do not have to pay tax on your assets in South Africa.
To end your tax exposure in South Africa as a resident, you need to get an emigration tax clearance certificate. The process of financial emigration entails having your bank execute the MP366 form, and then SARS issues the IT21 (a) tax clearance. Once done, the Reserve Bank approves the submission, and you are then no longer a South African taxpayer.
It sounds simple enough, but various complexities make this a rather difficult process, best handled with the help of experienced tax consultants. Also note that you do not always need a tax clearance certificate, which is best discussed with our tax practitioners.
Why Will You Thus Want to Financially Emigrate?
You may require the emigration tax clearance certificate if you want to access your retirement annuities in order to withdraw a lump sum of your money. You may find that although you have left the country permanently, your new country (host) may want you to financially emigrate, and thus have a tax clearance certificate as proof in order for you to start paying taxes as a resident in the country. Of course, it is one of the many formalities you must complete if you plan to permanently move abroad.
Unless you get the emigration tax clearance certificate, SARS sees you as a tax liable South African that is currently staying abroad. It is just one of those strings that must be cut in order for you to start fresh in your new resident country.
Indeed, unless you have completed the formalities of financial emigration, you must still submit your annual tax returns. You do face penalties for not submitting the returns.
The clearance makes it possible for you to transfer proceeds of your retirement annuity (subject to certain terms and conditions), access and transfer any inheritance proceeds, and proceeds of the assets that you have declared on your application to emigrate. This also makes it possible to transfer income from rental, dividends, and director fees, as well as life policies.
Let us help you with the process of getting an emigration tax clearance certificate.
Disclaimer: This article is for information purposes only and does not constitute legal, tax, or financial advice. Call on us for professional legal advice, rather than relying on the information herein to make any decisions. The information is relevant to the date of publishing.