SA laws change as regards withdrawal of retirement funds

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Retirement

Those intent on moving to Mauritius must complete financial emigration by end February 2021.

South Africans who have finalised financial emigration, or have their full application submitted to the South African Reserve Bank before the end of February 2021, have until then to withdraw their retirement funds. This includes the withdrawal of a retirement annuity, prior to maturity of that fund, according to Jonty Leon, Legal Manager (Expatriate Tax) at Tax Consulting SA.

This is thanks to an amendment signed into law by SA President Cyril Ramaphosa in January that changes the conditions around the withdrawal of retirement funding based on emigration. It effectively locks in retirement benefits for at least three years, effective March 1, 2021.

“This has been useful for many South Africans who have left or are currently leaving, as often these funds are used to set themselves up in their new home country. It also allowed for taxpayers to decide to remove their investment and invest in something more viable for their new circumstances,” says Leon.

In future, taxpayers will only be able to access their retirement benefits if they can prove they have been nonresident for tax purposes for an uninterrupted three-year period.

Therefore, SA taxpayers who hold retirement funds in SA but are living abroad need to carefully consider their options. Leon says, “Time is of the essence with little over a month to exit under the current regime. With such stark amendments, and an aggressive effort from SARS to recover revenue at all costs, leaving one’s head in the sand or adopting a wait and see approach is certainly not a smart option.”

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