As Americans recover from their 4th of July parties, it is indeed time to consider the tax cost and consequence for aliens investing with Uncle Sam

Yes, South Africans are aliens. President Trump may or may not have referred to people from South Africa as living in a s’hole country, who am I to say!

The IRS and USA tax laws most certainly labels us South Africans without an USA passport or green card as non-resident aliens.

We may not be from Mars nor Jupiter yet we are, upon death to pay FET (Federal Estate Tax) on our USA situs assets.

FET’s maximum rate is 40% and there is no spousal roll over. The exempt amount is a mere $60 000. No further SA estate duty is payable on the said USA assets, as there is a treaty in place

No spousal roll-over you ask? Yes, no roll over and the take home is that USA stock and cash held by you USA stock broker, should NOT be bequeathed to your spouse!

No, not to the offshore trust either as your wife will be taxed, upon her death assuming she is the surviving spouse, on the USA situs assets held within the offshore trust.

Who then, should be nominated as the named legatee in your will, as the person to inherit eBay, Facebook and all other USA equities?

Indeed an interesting question and one best addressed during a one-on-one meeting, with your SA accountant, duly present.

Need an appointment? Feel free to make contact on

Formal Emigration – Not advisable for all!.

First publisched by: http://www.bcbadvisory.com/formal-emigration-not-advisable-for-all/

Formal or financial emigration is the process to formally change your exchange control status from resident to non-resident. It is also sometimes known as Excon Exit.

Financial emigration will not affect a South African’s right to retain their South African citizenship or dual citizenship. It is thus a purely financial process.

Following financial emigration from South Africa, a person can remain tax resident in SA, based on the time spent in the country and subject to the double taxation agreement (DTA) in which the person will be living in future.

Tax emigration or exiting the SA tax system is not subject to formal emigration.

It is a complex process and not advisable for all, but why would one consider the options? What will be the costs?

The process

Before a person can start the process of formal emigration his/her tax affairs must be in order and up to date, as a tax emigration clearance certificate from SARS is needed to get the ball rolling.

As soon as a tax clearance certificate is obtained from South African Revenue Service (SARS), an application is lodged through a South African Bank also known as an authorised dealer (AD) of the SA Reserve Bank (SARB). All assets need to be declared to SARB. The AD then applies at the South African Reserve Bank for an Exchange Control Approval Number (ECA) where after a blocked account is opened alternatively an existing account is converted into a blocked account. Each immigrant may have only one blocked account.

Once the emigration process has been completed, capital transfers have to flow offshore via this ‘blocked’ account.

Capital acquired and income earned post formal emigration need not flow through this blocked account. Typically inheritances received once you have been formally emigrated can be paid by the executor to you foreign bank account.

Should you only leave a pension or living annuity behind, there is no need for a blocked account as the fund can pay directly to your foreign bank account.

Funds allowed to be taken out of South Africa

The South African Reserve Bank allows emigrants the following facilities:

Foreign Capital Allowance (FCA) – R10 million per adult per calendar year or R20 million per family unit per calendar year.

In the year of actual departure, a travel allowance of up to R1 million per adult and R200 000 per child under the age of 18 years is allowed. The travel allowance may not be accorded more than 60 days prior to departure; and

Export of household and personal effects, motor vehicles, caravans, trailers, motorcycles, stamps, coins and minted gold bars (excluding coins that are legal tender in South Africa) within an overall insured value of R2 million.

Any remaining assets in South Africa will be blocked, but can be used for locally for any purpose and more recently SARB will allow listed and unlisted equities to be transferred out of SA as part of your annual R10m FCA.

What BCBA can do for you

Many service providers focus on formal emigration or retirement annuities only. They therefore encourage clients to formally emigrate. In fact, formal emigration services are sold as a free consultation.

The days, if it ever existed, of free lunches is long gone.

Not only can you personally manage the formal emigration process, you can often legally avoid the cumbersome process

For certain clients, formal emigration is often the only option available for the cost of a telephone conference (R969). We will be able to analyse your position and suggest the best solution.

Where clients so elect, we will complete the entire formal emigration process on their behalf. The process will be explained to you in detail and once again, we facilitate the free flow of funds. Your SA Rand will at all times remain under your own control.

BCBA will also be able to assist and advise you on how funds from the blocked account can be accessed.

For clients with “trapped” retirement annuities, preservation funds and so called living annuities, BCBA will provide the necessary guidance and where required, we will facilitate with or without formal emigration.

You formally emigrated and need advice or a second opinion? Call on us and we will assist and guide you in the right direction.

Clients having inherited funds or assets need not formally emigrate. There may be a cheaper and easier alternative.

For more information in your unique circumstances, please contact Hugo van Zyl athugo@bcbadvisory.com