Silver Digest September/October 2020

MONEY

NEW TAX BILLS – A STEP CLOSER TO RETIREMENT REFORM

BY JERRY BOTHA, MANAGING PARTNER & JEAN DU TOIT, HEAD OF TAX TECHNICAL AT TAX CONSULTING SOUTH AFRICA

T

he draft Taxation Laws

emigration is recognised by the South

of exchange control] for an

Amendment Bill (‘TLAB’)

African Reserve Bank for purposes of

uninterrupted period of three years

was published on 31 July

exchange control”.

or longer” (emphasis added)

2020. As announced in the Budget

In essence, this proviso, which

In other words, reference

Speech, any South African leaving

reads the same for each of these

to the emigration process is

in future will be subject to a much

definitions, permits a person to

substituted with a new test that

stricter process from 1 March

withdraw their retirement benefit

requires a person to prove they

2021 onwards.

upon completion of a process of

have been non-resident for tax

emigration through the South

purposes for an unbroken period

African Reserve Bank.

of at least three years.

But there was also a surprise three-year lockup announcement for anyone with a South African

This new test will apply from

pension fund seeking to leave

PROPOSED AMENDMENT

1 March 2021. How this must

South Africa.

The proposed amendment follows

be proved other than ‘financial

the February Budget Speech,

emigration’ remains unclear at

to come for private pensions

where the government made

this stage.

in South Africa. Anyone with a

its intentions clear to overhaul

proper pension, ideas to move

this process as part of the

date, your retirement benefits will

abroad or just not trusting

modernisation of our exchange

be locked in South Africa for at

government’s plans with their

control system, as stated in

least three years. The proposed

pension money needs to ‘read

Annexure C to the Budget Review:

amendment signals a big policy

This appears a sign of things

the room’ and make careful decisions.

“As a result of the exchange control

Practically, after the effective

shift from a fiscal perspective, but

announcements in Annexure E, the

this is one piece to a bigger puzzle

concept of emigration as recognised

that should have those who seek

CURRENT POSITION UNDER LAW

by the Reserve Bank will be phased

to emigrate on high alert.

Under the current dispensation,

individuals to withdraw these funds

THE BIGGER PICTURE

the definitions of ‘pension

be reviewed.”

The ANC’s 2019 Election

preservation fund’, ‘provident

out. It is proposed that the trigger for

The TLAB, specifically

Manifesto expressly states that

preservation fund’ and

paragraphs (h), (k) and (m)

the party will “investigate the

‘retirement annuity fund’ in

of section 2(1), gives effect to

introduction of prescribed assets on

section 1 of the Income Tax Act

this decision, by amending the

financial institutions’ funds to unlock

No. 58 of 1962 (‘the Act’) contain

proviso to the aforementioned

resources for investments in social

a proviso that entitles a person

definitions in section 1 as follows:

and economic development”.

to withdraw their retirement benefits before retirement age.

“is a person who is [or was] not a

The discussion on ‘prescribed

resident [who emigrated from the

assets’ has also been mentioned

This applies where that

Republic and that emigration is

by President Cyril Ramaphosa

person “is or was a resident who

recognised by the South African

and it effectively involves

emigrated from the Republic and that

Reserve Bank for purposes

compelling retirement funds to

22

SILVER DIGEST // SPRING 2020