Maximizing pension fund and retirement annuity tax refunds

Understanding the intricacies of tax obligations becomes paramount as South Africans explore opportunities abroad or settle in foreign countries. Emigrating from South Africa opens the door to potential tax refunds, but navigating this process requires clarity and guidance. This guide sheds light on the eligibility criteria, methods, and considerations surrounding pension fund and retirement annuity tax refunds for South African expatriates.

Emigration and the implications on pension fund and retirement annuity tax refunds

Emigration signifies the formal cessation of tax residency in South Africa, paving the way for certain tax benefits, including refunds. Expats must understand the types of taxes eligible for refunds upon emigration, such as personal tax and policy tax.

If you have already retired:

If you already receive pension income from your retirement savings, you must continue doing so, even if you reside abroad. The capital underlying your retirement annuity savings isn’t transferable to another country, necessitating the maintenance of a South African non-resident bank account for the remittance of pension income abroad.

If you have not yet retired:

Upon undergoing tax emigration through the South African Reserve Bank, you become eligible to cash in your retirement annuity early, even before reaching the age of 55, subject to tax and fund penalties. Once SARS acknowledges your change in tax status from resident to non-resident, you must maintain this status for at least three years before withdrawing your retirement annuity funds. After settling the lump sum withdrawal tax (generally around 30% of your savings) and any early withdrawal penalties imposed by your fund, the remainder of your retirement savings will be transferred to a non-resident bank account in South Africa, where you can remit it abroad. Once you have withdrawn your retirement annuity in this manner, you can utilise your savings as you see fit, without any obligation to reinvest in retirement savings vehicles in your new country of residence.

If you already live abroad but have not yet cashed in your retirement annuity:

Completing the tax emigration process with SARS is necessary to become eligible for full withdrawal of your retirement annuity savings. This requirement stands even if you moved abroad several years ago and formalised emigration through the South African Reserve Bank, as most fund managers now demand a SARS Non-Resident Confirmation Letter to process the requisite tax directive before fund withdrawal. Fortunately, the date of ceasing tax residency marks the departure from South Africa, meaning there is no need to restart the three-year lock-in period. Suppose you left South Africa more than three years ago. In that case, you can likely cash in your retirement annuity immediately, provided all paperwork is in order and tax affairs are up to date.

Assistance from Apostil.co.za

Apostil.co.za serves as a concierge service, assisting clients with tax refund applications post-emigration. Clients incur fees only upon successful refunds, providing a risk-free solution for expats. It is important to remember that emigrants must meet specific criteria to qualify for tax refunds, including residency status in the destination country. However, not all countries allow South African expats to claim refunds, and certain funds may not always be eligible.

Which countries allow pension fund and retirement annuity refunds?

The table below indicates in which 29 countries South African expatriates can apply for pension fund and retirement annuity refunds:

Final thoughts

Navigating tax obligations as a South African expatriate can be complex, but understanding the potential for tax refunds offers financial relief. With the support of services like Apostil.co.za, expats can reclaim overpaid taxes and secure their financial future with confidence. By remaining informed and proactive, expatriates can effectively manage cross-border taxation and make informed decisions for their financial well-being.