For many South African retirees, the dream is clear: balmy weather, breathtaking scenery, and a relaxed pace of life abroad. But translating that dream into reality involves a critical financial step—moving money out of South Africa. This opens up a world of investment opportunities and potentially provides tax benefits and financial security.

However, navigating the world of offshore remittances can seem daunting. That’s why we want to shed some light on the various options available to South African retirees looking to move their money abroad. We’ll explore the exchange control limitations set by the South African Reserve Bank (SARB), consider some investment options, and consider the tax implications of going offshore.

Understanding the rules of the game: SARB and your offshore exchange control allowances

Like many countries, South Africa implements capital controls to manage the flow of money in and out of the country. The SARB, the country’s central bank, plays a key role in this by setting limits on how much money can be transferred offshore each year.

There are two main offshore allowances to be aware of before transferring money out of South Africa:

1. Single Discretionary Allowance (SDA): This allowance lets you transfer R1 million offshore per year for any legitimate purpose without needing SARB approval. It is only open to South African tax residents.
2. Foreign Investment/Capital Allowance (FIA): This annual allowance allows South African residents to invest or move up to R10 million offshore annually. This can be used for various purposes, including buying property, investing in stocks and bonds, or opening an offshore investment account.

Top tip: For expats making offshore transfers or tax residents looking to move more than R1 million out of South Africa, the new SARS Approval for International Transfers process will be necessary.

Cashing in your retirement annuities and moving your money out of South Africa

If your plans to retire in South Africa have changed, you should consider cashing in your retirement annuity unless you are already drawing a pension income from your retirement funds. To do this, you will need to complete the process of tax emigration from South Africa, whereby you inform the South African Revenue Service (SARS) that you no longer meet the requirements for tax residency and request that your tax status be formally updated to reflect your non-resident status.

Once you have maintained this non-resident status with SARS for three consecutive years, you become eligible to cash in the total value of your retirement savings. Once the lump sum tax on this payout has been settled with SARS, you can move this money out of South Africa to use as you please.

Read more:

• Understanding tax emigration from South Africa: a comprehensive guide
• Ceasing South African tax residency – what happens to your assets afterward?
• Retirement annuity policy surrender in South Africa: 3 important things for expats to understand.
• South African Retirement Annuities: what you can do with them before and after emigration?

Moving money out of South Africa by transferring funds offshore

Once you’ve decided how much you wish to transfer offshore, you must choose a method for moving your money out of South Africa. Here are some common options:

• Banks: Most major South African banks offer international money transfer services. However, these services can come with hefty fees, so compare rates before choosing a bank.
• Foreign exchange brokers: These specialists can often offer more competitive exchange rates than banks when moving money offshore from South Africa.
• Online money transfer services: Digital platforms can be a convenient and cost-effective option for smaller transfers.

Important things to remember when taking money out of South Africa

• Tax implications: While the FIA and SDA allow you to transfer funds offshore, you may still be liable for taxes on any investment income or capital gains earned abroad. It is important to consult with a tax advisor to understand your specific tax obligations.
• Tax emigration: If you plan to reside permanently outside of South Africa, you may need to consider tax emigration. This process involves severing your tax residency ties with South Africa and can have significant tax implications.

Read more: Planning to emigrate from South Africa? Here’s what you need to know about tax.

Expanding your financial horizons by investing offshore

If you’re not quite ready to leave sunny SA yet, you can still take your money out of South Africa. The beauty of investing offshore from South Africa lies on the broader investment universe it unlocks. Here are some investment options you might want to consider:

• Offshore investment accounts: These accounts allow you to invest in various assets, including stocks, bonds, mutual funds, and exchange-traded funds (ETFs).
• Tax-free investment accounts: Some offshore jurisdictions offer tax-free investment accounts, which can greatly grow your retirement savings without incurring unnecessary taxes.
• Asset swap: This strategy involves swapping some South African assets for offshore assets. It can diversify your portfolio and potentially reduce your tax liability.

Read more: Smart money moves: How to lessen the impact of tax on your offshore investments in South Africa.

Types of offshore investments: what you need to know

Different investment options come with varying levels of risk and return. You should do your homework thoroughly and consult a financial advisor to determine the investments that best suit your risk tolerance and financial goals.

• Stocks: Owning shares in companies listed on foreign stock exchanges can provide exposure to global markets and potentially high returns. However, stocks also carry a higher degree of risk.
• Bonds: These are essentially loans you make to governments or companies. They offer a steadier income stream but typically lower returns compared to stocks.
• Mutual funds: These are professionally managed investment vehicles that pool money from multiple investors and invest it in various assets. Mutual funds offer diversification and convenience but come with management fees.
• ETFs: Similar to mutual funds, ETFs are baskets of securities that trade on stock exchanges. They offer a low-cost way to gain exposure to a particular market sector or asset class.

Read more: Money Matters – How to Invest Offshore from South Africa.

FinGlobal: making informed money moves for a secure retirement

Moving money offshore from South Africa can be a strategic step towards a secure and fulfilling retirement. We can help you understand exchange control regulations and assist you with cashing in your retirement annuities and moving money out of South Africa safely and in a compliant manner. Remember, a well-diversified offshore portfolio can help you achieve your retirement goals while potentially mitigating currency fluctuations and minimising your tax burdens.

To find out how FinGlobal can help reduce the stress of moving your money out of South Africa, leave your contact details below, and we’ll contact you to discuss a tailored solution.