Question:

I live permanently in New Zealand. A few years ago, I went through the SARS & SA Reserve Bank's prescribed process to emigrate "financially" from South Africa, primarily to access the full fund value of my RA (retirement annuity) investments. Over the years, I have contributed more to my retirement annuities than allowed as deductions in the specific years, therefore I now have an accumulated amount of my own contributions not previously allowed as deductions. This amount is acknowledged by SARS and appears on my ITA34 (tax assessment). I believe this accumulated contribution amount must now be deducted from my retirement annuity lump sum before tax is calculated. This is a very general principle applicable when a retirement annuity investment is terminated, usually due to retirement or death, but also applying to complete withdrawal as in my case. This is very clearly described in SARS's own guideline document available on their website "IT-AE-33-G01 - Tax Directive for Emigration - External Guide". However, in my tax assessment this was NOT done, and when I raised a Notice of Objection with SARS, I received a response that it was disallowed??? Am I missing something? Or did they maybe misunderstand my circumstances? Surely this is a very straightforward and fairly common scenario?

Answer:

Joubert, We agree, this that is the principle: contributions not deducted for tax are returned tax-free to the retirement annuity holder on withdrawal. We cannot say why SARS disallowed the deduction. But it is of course unusual to keep saving through a retirement annuity when you have financially emigrated, and it may beg the question as to how these retirement annuity contributions were funded (ie possibly out of SA income that was not declared for tax in SA). You would have to phone SARS, or perhaps consult the fund administrator, for a full answer.