Retiring to South Africa: Your Pension

pension retiring to south africaIn last week’s Retiring to South Africa article, we shared the requirements for the South African retirement visa with you.

This week we’ll answer a question that have certainly run through your mind:

“What happens to my pension when I’m retiring to South Africa?”

Your main considerations

There are two main factors to consider when it comes to your pension:

  • How your pension will be taxed.
  • Transferring your pension to South Africa.

Tax on foreign pension in South Africa

In South Africa, any pension:

  • received by accrued to a tax resident of South Africa
  • from a source outside of South Africa, that is received in consideration for past employment outside of South Africa,

is exempt from income tax.

In other words – Should you become a tax resident of South Africa and receive a pension from your home country for employment in that country or a country other than South Africa, your pension will not be taxed in South Africa.

Please note: tax might still be due in the country that is paying the pension. This will depend on local laws in the country and the double tax agreement between this country and South Africa.

What is a double tax agreement? It is an international agreement contracted between countries to deal with potential competing taxing rights against the income of a taxpayer. This means if you’ve paid tax in one country, this payment can be counted as a credit to any tax liability in another country.

Transferring your pension to South Africa

Should you receive a foreign pension, you might have to transfer some or all of the funds to South Africa. You have two options for doing this:

  • Advising your pension provider to pay the funds straight into your South African bank accounts.
  • Advising your pension provider to transfer the funds into your overseas bank account.

In our opinion, an overseas bank account is the better option. You can then choose how and when to transfer money to South Africa.

Tip: Transferring money on a quarterly basis instead of a monthly basis might also save banking fees.

How to transfer money to South Africa…

It is advisable to use a currency exchange company based in South Africa for transferring money:

  • Currency exchange companies usually offer better exchange rates and no or little banking fees.
  • A South African-based company will be familiar with South Africa’s foreign exchange control regulations.

What is foreign exchange control regulations? These are regulations that control the flow of money in and out of South Africa. These regulations affect every transaction, no matter what amount gets transferred or who the sender or recipient is.

It is important to comply with South African foreign exchange control regulations, so that your funds get registered correctly when entering the country. If this is not done, you might not be able to return your money at a later stage if you ever have to.

For more information, call Incompass Financial Solutions

The information in this article cover only the most important points you need to know. As with all matters related to immigration, there is still much more to find out.

When you’re ready, we suggest you speak to the experts at Incompass Financial Solutions. Intergate work closely with Incompass. Incompass is an authorised financial services provider, specialising in foreign exchange and money transfers. The company is also ISO 9001 and 27001 certified.

You can get hold of Incompass directly by calling either the Cape Town or Johannesburg office:

Cape Town: +27 (0) 21 424 2936
Johannesburg: +27 (0) 11 234 4275

You could also get Incompass to contact you instead:

Request a call back.

Don’t forget to come back next week

In our third Retiring to South Africa article we’ll discuss your options when it comes to buying a home. Come back next week Friday to find out more. Or like our Facebook page – we’ll be sharing all articles on our page.

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