This month we explore the true cost of financial emigration, including other factors to bear in mind before considering this complex and expensive process.

In the past, South Africans who worked abroad for more than 183 days were exempt from paying income tax on foreign earnings. However, since 01 March 2021 expat tax came into effect meaning that South African tax residents abroad are to pay up to 45% tax on their foreign employment income where it exceeds the threshold of R1.25 million.

This amendment, along with other factors, has forced an increasing number of South Africans to emigrate, as well as emigrating financially: changing their residence status to ‘non-resident’ for tax purposes.

If this is something you are currently considering or planning to do in the future, here are the most important cost considerations:


  1. Retirement annuities

If you emigrate financially, three consecutive years must pass from when you changed tax residency before you can withdraw your retirement savings as a lump sum from any retirement fund, including a pension, provident or preservation fund. Any withdrawal made from these investments are also subject to tax.


  1. Living and life annuities

Since these are post-retirement investments, you are not able to withdraw the funds. The regular income also cannot be paid directly into an offshore account, so you would have to transfer the funds from a South African bank account to your offshore account.


  1. Property

You are able to keep property in South Africa after you have financially emigrated, but you will be taxed on any rental income you receive from the property. If you sell your property before emigrating financially, you will be liable for capital gains tax.


  1. Capital gains tax (CGT)

When ceasing your tax residency, capital gains tax applies to all foreign fixed property, shares, cryptocurrency, unit trusts and similar investments and trusts. Consider the following example:

If your net capital gain is R1,15 million, then R444,000 (40% of this amount, after taking into account the R40 000 annual exclusion applicable to individuals) would be liable to CGT in your personal capacity, while the 80% inclusion rate for Trusts means that you’ll be taxed on a sum of R920,000.

Assuming a personal tax rate of 41%, which is used to determine your CGT obligations, you will end up paying an exit tax of about R182,000 while the exit tax on Trust assets is around R414,000 on a CGT rate of 45%.


If you are considering financial emigration, discuss the decision with your financial advisor sooner rather than later. The cost implications could have a massive effect on this decision, so find out as much as you can before starting the process.