Despite all the positive noise coming from the government in the wake of the most recent South African budget, there are legitimate fears, voiced by NKC African Economics Senior Political Analyst Gary van Staden, that it will ‘make or break’ the domestic economy. While it has also added to the concerns of high-net-worth South Africans who are tempted to emigrate.
For anyone thinking about emigration, we can safely suggest Portugal as a sound choice of destination – a country with a favourable climate, Schengen Area privileges and multiple ways to access residency and eventual citizenship, whether via a Golden Visa, a D7 Visa or a Green visa.
But if you’re not sure what the budget means for you, we can take a look here.
The end of financial emigration through SARB
Let’s begin by saying that the latest budget makes one thing clear: the government wants South Africans to keep their financial ties with the country intact and with the South African so-called “expat tax” beginning on March 1, 2020, many high-net-worth individuals will, understandably, have questions about whether financial emigration to Portugal still makes sense.
This tax change, alongside others in the budget, means that many South Africans may now feel they are at a crossroads: strengthen ties with South Africa and face paying tax on worldwide income, capital gains, and estate duty, or take the bold step to set up home elsewhere; lock, stock, and barrel.
No one should be fooled into thinking that news of the tax exemption on foreign remuneration being raised from R1m to R1.25m is a huge positive. Given the recent travails of the Rand, it is neither surprising that this threshold has been raised nor nearly as significant as it might once have been. And with many experts predicting that the Rand will further weaken over the next 12 months, it may not be long until the benefit of the raised exemption is completely eroded. In the long game, it means very little.
Yes, the budget has timetabled the phasing out of the “administratively burdensome” process of emigration through SARB, but this law will not come into force until March 1, 2021, and, unfortunately, the Budget Announcement does not elaborate what exactly will replace it. Many experts predict that whatever happens, SARB will become much more stringent in seeking to obtain revenue from South Africans abroad.
The latest budget, including the proposals related to SARB emigration, indicates a significant change in government policy that aligns with its less-than-generous view of private medical aid, and those who have worked hard and invested prudently enough to be able to afford it.
Yes, there has been a clear skills, talent and wealth drain from South Africa, but this is not the fault of the people who have emigrated and it is a shame that the latest budget tries to exert pressures on high-net-worth South Africans to remain in the country and to share their wealth even once they have financially emigrated.
The good news for anyone who is considering leaving South Africa is that they have a notice period. There is only one-year left to achieve financial emigration, so the sooner a person begins the process of emigrating to Portugal, the more confident they can be of getting all the boxes ticked in good time.
Furthermore, anyone who wishes to transfer more than 10 million Rand out of the country under their annual foreign investment allowance, might want to consider doing so before March 1, 2021 when new, stringent rules regarding certification of tax status, the source of the money and other detailed verifications are likely to make the process exceptionally burdensome.
Blacktower Financial Management (International) Ltd. – another reason to emigrate
Since opening its first Algarve office in 1999, Blacktower has earned a reputation for improving the retirement plans and enhancing the wealth of its clients.
Our advisers are multi-lingual and can help clients negotiate all the important cross-border financial planning issues they are likely to face, both in Portugal and South Africa.
From optimising pensions and retirement accounts, to education and inheritance planning, we have all your major concerns covered. Contact us today for more information about how we may be able to help you.
Manuela Robinson is the Joint-Country Manager of Blacktower in Portugal. With offices in Quinta do Lago and Cascais.
[email protected] | 289 355 685
Blacktower Financial Management (International) Limited is licensed by the Gibraltar Financial Services Commission. Licence 00805B. Blacktower Financial Management Limited is authorised and regulated in the UK by the Financial Conduct Authority.