13 October 2008
Formal Emigration / Excon Exit Check-list
Hugo van Zyl, working in close corporation with other intermediaries, smaller and medium sized audit and or law firms, will gladly assist in analysing the feasibility of a formal emigration. Once the expat or emigrant to be is ready, we will assist with all formalities and the submission of the required documents at either or both SA Reserve Bank (SARB) and the South African Revenue Services (SARS).
Formal Emigration is indeed a SARB and SARS event and there is no reason to give up your SA citizenship, in fact we encourage all South African passport holders to protect their current passport. The SARB formal emigration is however subject to clients having the necessary immigration status in their new home country. Although we provide general guidance, based on SARB or Exchange Control (Excon) guidelines however all clients will have to appoint their own immigration agent or lawyer in their chosen home country.
Tax emigration is often partly completed prior to the financial emigration from our Excon system; however clients should also ensure they have appointed a tax accountant in their new home country to ensure the transfer of asset values is correctly processed. Certain immigration jurisdictions allow immigrants to exit the SA system and gradually enter the new tax system. The most well known is probably England and it’s NDR system yet more recently New Zealand and Australia announced certain tax deferment options. Hugo has a working knowledge of these rules however specialist advice should be obtained locally in the immigrant’s new home country.
Before we can assist, we require the following information:
1. Initial Analysis – minimum documents required
1.1 FIC Act documentation (www.fic.gov.za); i.e.
1.1.1 SA ID document – certified
1.1.2 SA Passport – certified
1.1.3 SA utility bill reflecting residential address or acceptable alternative
1.1.4 SA Tax number and copy of last tax return filed alternatively a newly completed SARS IT77 form; and
1.2 An acceptance of our standard terms of business, based on the SAICA proposed mandate letter – refer to our webpage;
1.3 SARS limited Power of Attorney – as per SARS web page
1.4 Tax reference number in new country
1.5 New Passport, work permit, permanent residence permit or green card (USA).
1.6 Latest balance sheet as filed with either SARS and or SA bankers. For a family unit we require a separate balance sheet per person;
1.7 Summary of pension funds, retirement annuities and life cover as separate summaries;
1.8 Short summary on the family’s background i.e. source of funds, family structure and an indication of the assets to be externalised vs. assets to be left in SA as blocked assets?
2. Our Initial Analysis
Based on the above check-list and any other information Hugo may require;
2.1 An initial analysis is provided to the client or the referral firm or intermediary; where after
2.2 The client must sign and confirm our analysis as true and correct as this document will be relied upon by the local advisors (bankers, insurance brokers and auditors) as well as the new advisers in the new home country.
3. Client Elects To Proceed / Place Application On Hold
Consider alternative or more appropriate options such as FIA (R2m per person) or FDI where the emigrant is required to expand his SA business formally into new country but do note neither the FDI nor the FIA are emigration options!
3.1 Update the tax status of the client, his spouse and that of his children to be included on the family emigration form. We normally rely heavily on the client’s existing relationship as they will best know the answers to all questions following the
3.2 Tax clearance application; which entails the following information / decisions:
3.2.1 Market value analysis of life cover and retirement funding;
3.2.2 Name and address of local SA agent taking responsibility for the filing and payment of future taxes;
3.2.3 Updated market value balance sheets per taxpayer as well as consolidated family unit balance sheet; where after
3.3 A client meeting or telecon (using Skype) can be arranged to ensure the client has a correct understanding of the process, the implication and the cost of such an application which includes:
3.3.1 Our fees and the fees of other family advisors;
3.3.2 CGT on the sale or deemed sale of SA assets;
3.3.3 The fees to be charged by the chosen authorised dealer i.e. obtain details of chosen bankers (authorised dealer where client and or spouse have account at various different banks) where after contact should be made with the non-resident or cross border branch of the elected authorised dealer.
3.3.4 Excon Exit Levy – the rate, how it is calculated and when it is payable;
3.3.5 Cost of a failed emigration where clients return to SA within 5 years and there after.
3.4 Present at the meeting, be telecon or through file notes as the clients, their tax advisor and accountant if not same and any other advisors such as corporate trustee
4. The SARB Emigration Application M.P. 336(b)
The following information and documentation are to be presented to Excon through the authorised dealer:
4.1 Documentary proof of permission to live in the new country, i.e. certificate of citizenship, proof of residency etc. or new passport;
4.2 Copies of tax advice taken in the country that they are emigrating to. 5
4.3 Proof of any remaining Foreign Investment allowance available for the family.
4.4 New consolidated balance sheet of the family unit using the heading as reflected on the said MP336(b); and client to indicate
4.4.1 Assets to be transferred within the next 3-5 years;
4.4.2 Assets to be retained in SA as so called blocked assets. Each class of asset has different requirements before they are effectively placed under control of the authorised dealer.
4.5 Where there was any donations made or received within the last 3 years:
4.6 Where there is any trust obtain the following:
4.6.1 Trust deed;
4.6.2 Last 3 years annual financial statements
4.6.3 List of any capital distributions (awards or donations) from a trust in previous 3 years
4.6.4 History on the funding and formation of the trusts. The client should be made aware of the fact that there is an Excon differentiation between an inter vivos and mortis cause (or will) trust; and
4.6.5 Undertaking to ensure trust’s board of trustees are mainly or in the majority, resident in SA
4.6.6 Completed forms M.P.1330(a) and M.P.1331 iro income remittances post emigration from the trust based on last Audited financials or Pro-forma for the Financial year end. No post emigration income can flow until submitted and approved – yet no capital may leave without the 10% Excon exit levy i.e. the trusts’ annual accounts must be filed regularly post emigration
4.7 Obtain full details of Insurance policies, Living and Retirement Annuities (including history i.e. age and amounts contributed), Pension Funds ; which sahell include
4.7.1 Contact details of FSB approved broker;
4.7.2 Original policy documents which has submitted to the Authorised Dealer as so called blocked assets although annuity and pension may normally be remittable once emigration is completed;
4.8 Name and address of share dealer / stock broker / wealth manager iro of the all the family units as well as the associated trusts; and where client so wish
4.8.1 Unlisted shares retained: Obtain share certificates, loan certificates and last 5 years annual financial statements should be filed with the Authorised dealer. Client should be made to understand borrowing limitation may now apply;
4.8.2 Listed shares: Letter of undertaking from the broker / wealth manager
4.9 List of all credit cards to be cancelled or retained as debit cards as well as all other bank accounts to be consolidated and closed in favour of the single blocked account operated by the non-resident centre / cross border branch of the chosen authorised dealer;
4.10 List of all known liabilities which includes:
4.10.1 Immediately due and payable income tax and removal costs;
4.10.2 Post emigration expenses of liabilities such as cost to maintain family’s holiday home, cell phones etc. As guideline we provide the following amounts which may be taken from blocked funds: R75 000 living allowance for periods spent in SA, R100 000 annual donations, R100 000 property maintenance, all medical expenses but note that the post emigration tax liability must be funded from post emigration income which is normally remittable funds.
4.11 Detailed information on all fixed property, share block and time share assets:
4.11.1 Require a reasonable valuation of property at date of departure, although there is no SA CGT until the immovable property is sold;
4.11.2 Valuation used for both the M.P. 336(b) and for CGT in new country of residence;
4.11.3 Warn client on the new CGT withholding tax rules now applicable to non-resident taxpayers; and finally
4.11.4 Obtain original Title deeds or where necessary a certificate and letter of undertaking from the mortgage holder
4.12 Debtors and other amounts collectable i.e. funds held in trust by transferring attorney:
4.12.1 Need certificate of balance in required format from each debtor (including loans receivable); and
4.12.2 Letter of undertaking re payment into blocked accounts
4.13 Other assets – Timeshare, motor vehicles, furniture, personal effects etc not exported.
4.13.1 Once again valuation and Certificate of Title where applicable; together with
4.13.2 Letter of undertaking in prescribed format;
But excludes any of the following, all of which can leave without a 10^% Excon Levy up to a maximum of R1m (which is subject to review):
4.13.3 Chattels, yachts; personal effects and any other assets to be sent out on form NEP (No Export Proceeds Form); therefore
4.13.4 Separate NEP for each class of assets i.e. furniture going by ship vs. coins and jewellery being carried out as hand luggage. NEP must be pre-stamped by Authorised Dealers
All current and future liabilities need to be accounted for, including CGT on assets disposed of or retained but deemed as disposed, professional fees and removal / relocation costs. As these liabilities will be settled from blocked funds certificate of balance may be required / loan certificate where it is an intra-group loan to trust or private company