Can a taxpayer withdraw a Retirement Annuity, Pension or Preservation fund and transfer this to a similar product abroad without paying tax?
Important:
This answer is based on tax law year ending 28 February 2021.
Answer:
In terms of paragraph (b)(x)(dd) of the definition of “retirement annuity fund”, in section 1(1) of the income Tax Act, a member who discontinues his or her contributions prior to his or her retirement date shall be entitled to … the payment of a lump sum benefit contemplated in paragraph 2(1)(b)(ii) of the Second Schedule where that member –
(A) is a person who is or was a resident who emigrated from the Republic and that emigration is recognised by the South African Reserve Bank for purposes of exchange control; or
(B) departed from the Republic at the expiry of a visa obtained for the purposes of—
(AA) working as contemplated in paragraph (i) of the definition of ‘visa’ in section 1 of the Immigration Act, 2002 (Act No. 13 of 2002), or
(BB) a visit as contemplated in paragraph (b) of the definition of ‘visa’ in section 1 of the Immigration Act, 2002 (Act No. 13 of 2002), issued in terms of paragraph (b) to the proviso of section 11 of that Act by the Director-General, as defined in section 1 of that Act, and is not regarded as a resident by the South African Reserve Bank for purposes of exchange control; …
The tax will then be in accordance with the relevant tax tables for lump sums. But you must determine the right of the RSA, if the person is a resident of a treaty country, with reference to the relevant Article in the agreement between the RSA and that country. It is only the definitions of pension preservation, or provident preservation, fund that contain a similar provision.