Making aliyah is a financial challenge of note

JORDAN MOSHE

That’s according to Bankfin finance experts Jeremy Bank and Venessa Kotze, who on Monday night unpacked the complexities of financial emigration at Beyachad in Johannesburg in front of a packed auditorium.

“When you pack up a home and make aliyah, it’s tough,” said Bank, a chartered accountant. “I’ve lived through it. There’s the physical part of packing, resettling a family – it takes years off your life.

“But what so often happens is that the whole issue of financial arrangements gets left on the backseat. In many cases, it goes under the wheels, and it creates terrible tzorres (difficulty and suffering).”

Together, he and Kotze stressed the need to establish a financial plan before emigration, deciding whether to transfer your finances to Israel with you, or leave them in South Africa.

“If you start planning when you land in Israel, you’ve missed out,” Bank says. This needs to be planned well in advance.

“There are issues concerning your finances that will keep coming up. Financial emigration is not a point in time. Yes, it aligns with boarding a plane, but there’s legislation involved, to say nothing of the complex financial systems of two countries.”

According to Kotze, a tax practitioner, dealing with the department of home affairs is the easy part, and has little bearing on your financial changes. “Your passport and actual travel mean very little,” she said. “The South African Revenue Service (SARS) and the South African Reserve Bank (SARB) are involved. You can’t emigrate financially without them.”

“The SARB looks over your shoulder the minute any funds leave the country or come in,” said Kotze. “Everybody thinks you fill out a form, and that’s all. It’s a misconception. Before you fill out anything, there’s a mountain of things to do, including statements, share valuations, and trust deeds.

“The SARB knows your whole history by the time you’ve filled out any form. To fill anything out is no easy feat – it’s a mountain.”

Even once the form is completed and certified, the process has only just begun.

“The SARB now knows about all your income,” said Kotze. “When those amounts accrue to you and enter your bank account, and it happens that you omitted anything in your form, the money won’t be remitted to you offshore. You can’t touch it if you didn’t declare it.”

She said tax clearance is essential to taking any money out of the country, meaning that all your tax returns need to be up to date. “Believe you me, they dig everywhere to find out what your status is. It’s amazing what they can uncover.”

Kotze said the tax clearance is only valid for 12 months, and in that time, you need to decide how much money you want to take out. If you fail to do so, you need to apply all over again. “If you decide to go, you must go. You mustn’t hesitate. You have 12 months. It will cost you money to reapply.”

Getting money out of South Africa before emigrating financially can be accomplished in various ways, including using a discretionary allowance or a capital allowance. The method you use depends on the amount you require, and may involve applying for a tax certificate in order for this to be carried out.

Whichever you use, it’s essential to declare every cent. “SARS has fingers in all the pies,” said Kotze. “They will pick up something you haven’t declared. Honesty is really the best policy here.”

She and Bank explained that virtually any amount of money can be taken out of the country, but you need to have it on hand. “If you apply for R8 million, you have to prove to SARS that you have that in an account ready to go,” they say. “Liquid assets like a share portfolio are acceptable, but property isn’t unless it has been sold and lodged with the deeds office.”

The taxes you will be liable to pay will also depend greatly on which country you spend most of your time in, and both South Africa and Israel investigate this closely. Both countries have a required number of days you need to spend outside the country in order to avoid being deemed a taxable resident, but they don’t only rely on day counts.

“They will look at where your centre of life is,” said Bank. “The days could be irrelevant. They look at where you ordinarily engage and move about. People try to escape the system on both sides, but can end up falling into both tax nets. This leads to a double tax agreement, a very grey area that is difficult to navigate. It’s not simple, so tread carefully.

“You need to determine where you live. The point is when you emigrate, remain emigrated. Don’t wear two tax hats – it creates problems. Yes, you can return, but watch your days. Don’t create complications. Choose one hat, and wear it.”

The experts reiterated that the process of emigrating financially has multiple steps, but isn’t the right path for everyone.

“Start with a personal balance sheet,” they said. “Know what your assets and liabilities are. Once this is done, it’s time to consider. There is no right or wrong answer when you emigrate financially. Some people choose to remain a South African tax resident, and others don’t.”

Still, one must remember that when you board a plane, you may cease being a tax resident but are subject to capital gains tax.

“When you board a plane and leave, it’s an indicator that you are severing ties with South Africa permanently,” said Bank. “The implication from a tax point of view is that it triggers a deemed capital-gains tax event. Tax authorities have every right to pursue you based on the deemed values of your property, and demand it of you. Whether you do or don’t financially emigrate, you automatically trigger an obligation to render capital-gains tax with your next South African tax return.”

He concluded, “Financial emigration is optional. Whether it is necessary depends on your circumstances. There are indicators that may make it advisable, such as inheritance expectation, insurance policies, and retirement funds, but you need to choose one way or the other.”