SA’s millionaires head for the exits – and here’s where they are going

02 August 2023 Sovereign Trust SA
Coreen van der Merwe

Coreen van der Merwe

South Africa’s bleeding millionaires – and there doesn’t seem to be any stopping the trend. The numbers suggest one in every five millionaires has sought greener pastures over the past decade, with around 1500 high nett worth individuals (HNWIs) heading for the exit in 2022 alone.

Why are they going? And more importantly where are they going? Coreen van der Merwe, a director at Sovereign Trust SA, says there’s been a sharp uptick in interest in destinations such as Singapore, Canada, Australia and Malta, which all offer various options for relocation, highly diversified economies and supportive environments in which to do business.

Other popular emigration destinations include the United Kingdom, the United States, France, Israel, Monaco, New Zealand, Portugal, Switzerland and the United Arab Emirates.

“HNWIs are actively focused on the flexibility that a foreign or second citizenship brings. The main reason that they apply for a second residence or citizenship is to ensure freedom of global mobility and access, as well as security and wealth protection for their families in the long term,” says Van der Merwe.

Apart from providing a secure second option, moving abroad offers a range of benefits, including the ability to travel internationally without visa restrictions; providing better healthcare, education and career prospects; offering a comfortable, convenient and tax efficient location to retire; greater tax efficiency; wealth management; and estate planning.

The potential impact of looming wealth tax consideration on HNWIs has been a clear driver behind the trend of relocation to other jurisdictions, says Van der Merwe. It’s also no coincidence that most of these destinations are business-friendly environments. Destinations like Singapore and the UAE are booming hubs for innovation, with world class infrastructure and financial systems.

What’s more worrying for the country is that it’s not only HNWIs who are leaving. SA Revenue Service (SARS) figures show that more than 40,500 taxpayers ceased to be tax residents of South Africa between the 2017 and 2021 tax years. The data shows a growing trend of taxpayers from lower-income brackets changing their tax residency, which means they are ending their tax residency younger.

Whatever route you end up taking, though, it’s critical to get expert advice before making any move to ensure you remain tax-compliant and to navigate the nuances of each programme and country.

“There are so many points to consider before making a decision on where to emigrate,” says Van der Merwe. “These include succession and estate planning; personal, commercial and health insurance; and investment and retirement planning. A second residency may influence how your wealth and estate is handled and taxed at death, how a country taxes your pension, the inheritance laws applicable to that country, as well as the need for change of insurance.

It’s one of the key reasons Mauritius has become a key destination for South Africans in search of greener pastures. With its attractive tax regime, stable economy, low barriers to entry for both businesses and individuals and its rapid economic growth it is fast becoming a haven for high-net-worth individuals and retirees - who only need to show income of USD1 500 available per month or USD18 000 for the year.

The reality is that it’s not a one-size-fits-all approach: every individual’s choices will differ, based on their needs and circumstances. That’s why it’s always advisable to seek professional assistance and start planning well in advance before you head abroad, whatever your financial status.

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