Until relatively recently, any South African who was emigrating to another country on a permanent basis could, after being granted permanent residency in their new location, also apply for ‘financial emigration’, and thereby officially cut any ties with regards to tax residency. It also allowed them to withdraw up to a third of their pension pot as a lump sum prior to the official retirement age, which can be very useful when starting a new life abroad with all the associated costs that entails. However, since March 2021, there have been certain changes made to the process by the South African Revenue Service (SARS). Along with more stringent eligibility requirements now necessary to qualify for financial emigration, it is only permissible to withdraw pre-retirement funds from a pension scheme after a period of three consecutive years as a non-tax resident in South Africa. Naturally, this can complicate financial matters significantly.
When you do finally manage to qualify as a financial emigrant, a whole new set of questions then need to be answered; most notably, what is the most tax efficient way of maintaining my wealth in a new country where I’m unfamiliar with the financial laws and products available? This is where the benefits of speaking to a local financial advisor become most apparent. There can be a tendency for the newly arrived to rely on familiar and trusted individuals that they have consulted for years previously on matters of finance – but the truth is you are much better off forging new relationships with qualified advisors, who are regulated to operate in your new country of residence. Trying to continue working with someone based in another hemisphere may not be the most efficient route.
There are a number of robust, tax compliant products on offer in Portugal, and these can be the ideal means by which you transfer your assets in the most structured, cost-effective way. Leaving investments back on home soil, or indeed off-shore, may lead to complications as to where you are tax resident and could see you maintaining tax liability in other jurisdictions than in Portugal. A further benefit of investing in the domestic market is that when you are finally able to access your pre-pension lump sum after 3 years of residency, you will have the ideal vehicle already arranged by which you can move the funds across and have peace of mind that you are compliant with any local laws that govern such transfers of capital.
Speaking with experience, I can say that moving from South Africa to Portugal is one of the best decisions that I ever made, and I’ve never regretted it for a moment. Year on year the community of expats from that part of the world continues to grow here on the Algarve, and it’s a lovely reminder of the old country when I come into contact with them, be it professionally or socially. If you are thinking of making the move, or have done so already and would like some guidance on how best to manage your financial affairs, give me a call to see how Blacktower can help you make the most of your finances.
Blacktower Financial Management has been providing expert, localised, wealth management advice in Portugal for the last 20 years. We can help with specialist, independent advice on securing your financial future. Get in touch with us on +351 289 355 685 or email us at info@blacktowerfm.com.
Manuela Robinson, Associate Director, Portugal
This communication is for informational purposes only and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.
Expat retirement transfers have the potential to play a critical, and beneficial, part of an expat’s financial planning. However, this is only if the process is undertaken in a considered fashion with reliable, regulated and trustworthy advice that investigates all of the options, including the possibility of a QROPS or SIPPs transfer.