A safe and secure home for pensions for South Africans

“Why South African Individuals and Companies working outside the Republic should consider the advantages of Isle of Man Pensions”.

Introduction
The Isle of Man Retirement Benefits Schemes Act 2000 and the Retirement Benefit International Regulations aim at providing tax neutral (that is to say that the Isle of Man authorities receive no tax revenue from these schemes) international pensions in a regulated environment for individuals or corporations.

This framework provides an opportunity to provide offshore pensions for individuals and Corporations from South Africa in favourable circumstances.

The Isle of Man as a Centre for International Pensions Business
This International Pensions legislation provides security for individuals and corporations; Equilibrium Pensions has been at the forefront of developing International Pensions specifically for ExPat South Africans- the International Personal Pension (“IPP”) and the International Corporate Pension (“ICP”).

South Africa
The current legislation in South Africa permits South African residents to receive (subject to meeting the required criteria), free of tax, income from an overseas pension scheme.

Under the source-based taxation system, pensions that are not from a source in or deemed to be in the Republic (of South Africa) are not subject to tax in South Africa. An exemption from tax in South Africa exists, therefore, for the following receipts and accruals:

“• Any pension received by or accrued to a resident from a source outside the Republic and not deemed to be from a source in the Republic (the deemed-source provisions for pensions derived from governmental services and pensions derived from non-governmental services, in consideration of past employment outside the Republic). In other words, if a resident receives a non-governmental pension for services rendered partly in and partly outside the Republic, the portion of the pension relating to the services outside the Republic is not deemed to be from a source in the Republic and will qualify for exemption”.

The issue has recently been reinforced by the South African Revenue Service (“SARS”); and the exemption from tax from overseas pensions remains in force.

The detail was given additional clarity by SARS in a Bulletin. The binding General Ruling (Income Tax): no 25 issued on 14 November 2014 provides a ruling in respect of section 10(1)(gC)(ii) of the (South African) Income Tax Act No 58 of 1962 confirming the above and providing a further interpretation of the term “source outside the Republic” to mean either foreign services rendered or the location from where the pension is received (namely where the pension fund is situated). The position was reaffirmed on 16th March 2017 in Issue 2.

Accordingly South Africans who have worked or who are working as expatriates outside the Republic and who wish to return back to South Africa in retirement should consider the use of International Pensions located in the Isle of Man as a tax efficient means to obtain resilient pension income upon retirement. Thus complying with both criteria above.

South African Links
Over a century of links between the Isle of Man and South Africa exists. With the decline of the mining industry in the Isle of Man at the end of the nineteenth century and the discovery of diamonds and precious metals in South Africa around the same time, many locals from the Island (Manxmen) emigrated to South Africa in search of work and opportunity. As a result long standing relationships between the two countries were established that continue to exist to the present day.

A number of Manxmen rose to prominence in South Africa, including the likes of Joseph Mylchreest, and a later Mayor of Johannesburg, Dan Corlett. Perhaps more important to South Africa was Philip Moore, originally a school teacher from the Isle of Man, who rose to become President of the Johannesburg Stock Exchange. Whilst serving as a United Party Member of Parliament, he was responsible for the decimalisation and the naming of the Rand.

Equilibrium Pensions can provide robust structures in the form of pensions based on the Isle of Man in a well regulated environment to safeguard offshore earned assets in a tax optimised way for future pension provision for individuals returning to live in South Africa in retirement.