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  • Financially emigrating - why it matters for inheritance claims

Financially emigrating - why it matters for inheritance claims

29 July 2019

Anna Brand, Cash Management Consultant, BDO Wealth Advisers |

Today, it is relatively common for South Africans to have family members living and working overseas. Sometimes these relatives will have formally emigrated, and sometimes not. The distinction will not always seem that important, but one area where emigration status does become crucial is when it comes to estate planning.

In this context, there are some important issues for former South African residents to consider when they receive – or it looks like they may receive – an inheritance from a South African estate.

One of the main reasons for this is that when many South Africans “emigrate” they do not go through the official process of emigrating financially. This financial emigration will become necessary if the heir has closed all South African bank accounts, deregistered their South African tax number, but has not yet completed the Reserve Bank’s MP336(b) form.

While it may feel that way, living abroad for a long period of time does not automatically change your status to “emigrant”.

From the perspective of the South African Revenue Service (SARS) and the SA Reserve Bank (SARB), an emigrant is someone who has submitted an MP336(b) to the SARB, and who has received a reference number confirming his or her emigration.

The form in question essentially changes the status of a South African citizen to emigrant status, and the reference number functions as proof of one’s residence status for exchange control purposes. Once this has been provided, the inheritance can be distributed to the heir.

While it is sometimes practical to complete this process at the same time one is wrapping up matters and leaving the country, it is never too late. Even decades after someone leaves South Africa, and after they have already been named as an heir, they can still make retrospective application to the SARB through a South African bank, by submitting the MP336(b).

As part of an organisation working in this field, our office regularly assists with such matters, and the retrospective application is usually a relatively straightforward process.

Another issue that affects the process is the personal circumstances of the individual heir. Here, emigrant heirs tend to fall into one of three categories.

They could be (a) a South African resident temporarily abroad; (b) someone who has emigrated formally in terms of exchange control and is therefore classified as a non-resident; or (c) a non-resident who was never a South African resident.

For non-South Africans who can provide evidence of their non-resident status, the funds can usually be transferred directly into their overseas bank account. This usually requires providing a passport showing the individual was not born in South Africa.

In cases where a South African person still has an account at a South African bank and has not formally emigrated, the inheritance can easily be transferred to the local account. From there, one can remit the sum overseas, as part of the individual’s single discretionary allowance of R1 million or the annual foreign investment allowance of R10 million.

The R10 million foreign investment allowance requires tax clearance, and may be complicated if the amounts in question exceed the allowance or if the person has deregistered their tax number. It may require reregistering for tax in order to get tax clearance – but a professional in this area will be able to advise on the best course of action.

While we’re on the topic of citizenship, there is a fear among South Africans that if they formally emigrate they will lose their South African citizenship. This is not the case.

Ultimately, estate planning is about managing one’s legacy. This becomes more complicated as our society becomes more globalised.

However, there are laws and regulations in place to manage inheritance across international borders, which have various implications for different individuals. With the right knowledge – and the right advice – we can navigate this sometimes complex environment, get our affairs in order and ensure that our heirs receive what is due to them.

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