Changes regarding access to retirement fund withdrawal benefits on emigration from 1 March 2021
The Taxation Laws Amendment Act 23 of 2020 (TLAA 2020) was promulgated on 20 January 2021 and introduced changes regarding access to retirement fund withdrawal benefits for South African tax residents when they emigrate, effective 1 March 2021.
What is changing?
Currently, South African tax residents can withdraw from a retirement annuity fund, pension preservation fund, or provident preservation fund when they formally emigrate from South Africa (i.e., where that emigration is recognised by the South African Reserve Bank (SARB) for the purposes of exchange control). As the concept of emigration for exchange control purposes is being phased out due to the modernisation of the exchange control system, the TLAA 2020 introduced a new trigger that will allow members to access their retirement savings from 1 March 2021.
From 1 March 2021, members will only be able to access their retirement savings once they have ceased to be a South African tax resident and have remained a non-resident for three consecutive years or longer on or after 1 March 2021. The amended legislation makes provision for those who were in the process of formally emigrating before 1 March 2021 to withdraw their benefits, provided their emigration applications were submitted to and approved by the SARB before certain dates (see below).
When may a member qualify for a full withdrawal due to emigration or the cessation of South African tax residency?
In summary, from 1 March 2021, members of a retirement annuity fund, pension preservation fund and provident preservation fund, may qualify for a full withdrawal of benefits before retirement where:The member is, or was, a South African tax resident who emigrated from South Africa; the emigration is recognised by the SARB for the purposes of exchange control; the emigration application was received by the SARB on or before 28 February 2021 and is approved by the SARB on or before 28 February 2022, or
The member has ceased to be a South African tax resident and has remained a non-resident for an uninterrupted period of three years or longer on or after 1 March 2021.
The requirements to withdraw for members who have left South Africa at the expiry of a work or visit visa are not changing from 1 March 2021.
The South African Revenue Service (SARS) still needs to confirm some specifics, including the supporting documentation required from 1 March 2021
SARS provides the procedural requirements to process these withdrawal instructions, but has yet to confirm the supporting documentation that will be required from 1 March 2021, including how the three-year non-residency requirement will work. As a result, we may be unable to answer questions around specific client situations until further clarity is received.
We will inform you when we receive confirmation on the new requirements.