South African expatriates hoping to access retirement annuities or preservation funds before retirement age must comply with strict SARS regulations.
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For many South African expatriates, accessing retirement annuities, preservation funds and other long-term investment policies before retirement age has become a key financial goal.
However, early withdrawals are governed by a strict regulatory framework administered by the South African Revenue Service (SARS), with several compliance requirements that must be met before funds can be released or transferred abroad.
A critical first step is formally ceasing South African tax residency with SARS. Simply leaving the country is not enough, as SARS must recognise that the individual is no longer ordinarily resident in South Africa or no longer meets the physical presence test.
This non-residency status must be officially recorded on the taxpayer’s SARS eFiling profile before early withdrawal of retirement funds can be considered.
The cessation date is also important because it triggers the mandatory three-year non-residency waiting period introduced on 1 March 2021.
Under the rules, expatriates must remain non-resident for an uninterrupted period of at least three years before they can access retirement annuities and preservation funds before retirement age.
The waiting period begins from the SARS-recognised cessation date, not necessarily the date the individual physically left South Africa.
Experts warn that delaying the cessation of tax residency can postpone the start of the three-year waiting period and ultimately delay access to retirement savings.
Policy providers and fund administrators also impose banking requirements before proceeds can be paid out.
In most cases, funds may only be paid into a South African bank account held in the policyholder’s own name, in line with anti-money laundering and Financial Intelligence Centre Act (FICA) regulations.
Expatriates are therefore encouraged to maintain or open a compliant South African bank account to avoid delays once approvals are granted.
Before any withdrawal can be processed, fund administrators must obtain a tax directive from SARS.
The directive confirms the individual’s eligibility to withdraw funds, determines the applicable tax rate and authorises the payout.
Supporting documents usually include proof of cessation of tax residency, evidence of the three-year non-residency period, and updated identification and tax records.
Once the proceeds have been paid into a South African bank account, expatriates wanting to transfer the money abroad must apply for an Approval International Transfer (AIT) Tax Compliance Status (TCS) PIN from SARS.
The AIT TCS PIN confirms that the taxpayer’s affairs are fully compliant and that the source of the funds has been verified.
Applications require all outstanding tax returns to be submitted, tax liabilities settled, and supporting documentation provided to verify the source of funds.
SARS will not approve cessation of tax residency, tax directives or AIT TCS PIN applications if taxpayers have outstanding returns, unpaid tax debt or incomplete financial disclosures.
Common mistakes that continue to delay applications include postponing tax residency cessation, assuming funds can be transferred directly offshore, failing to maintain a compliant South African bank account, and attempting to apply while tax records remain incomplete.
Financial experts say expatriates who follow the correct process and remain fully compliant with SARS requirements can successfully access and externalise their retirement savings, while those who fail to comply risk costly delays and complications.
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