Policy Withdrawals - Navigating the Inconsistencies of Expat Requirements

What are the requirements for withdrawing a policy as a South African abroad?

Prior to the 3-year lock in rule, the South African Reserve Bank was heavily involved in the process alongside SARS, which is known as the “old regime”. The “new regime” is now mainly a SARS driven process with strict requirements needing to be adhered to. During the withdrawal process, the policy provider will act as the “middleman” between SARS and the policy holder. Here is a list of the general requirements to be aware of:

1. Proof of exit from South Africa and residency abroad

The most pertinent item that SARS would require for this is your proof of exit from South Africa Relevant supporting documentation also required as proof of this would be confirmation of residence or approval of entry into your current country of residence (i.e., visas/permits/certificate of citizenship). Not only does this confirm your physical residence and right to live abroad, but also confirms, to SARS, that you intend on staying abroad indefinitely.

2. Certificate of Tax Residence in the current country of residence

Further to confirmation of your physical residence in the current country of residence, SARS requires proof that the policy holder(s) are in fact registered for and/or paying tax abroad.

Confirmation of tax residency in a country other than South Africa has become a vital requirement for withdrawing your policy. This step has been introduced to ensure that you are in fact being taxed correctly, both in South Africa as well as your current country of residence. It is important to note that this needs to be provided for 3 consecutive years which further confirms that the policy holder has satisfied the 3-year lock-in period requirement.

3. Confirmation of the date of cessation of tax residency in South Africa

A new initiative introduced by SARS in 2022, is the Notice of Non-Resident Tax Status letter. Not only does this letter confirm your cessation of tax residency in South Africa, but it also informs the policy provider as well as SARS the exact date of cessation. This makes it easier for the policy holder to confirm that they have met the 3-year lock-in period requirement. If you have correctly ceased tax residency before the introduction of this letter, you are required to “reverify” your tax residency status with SARS and obtain this letter.

It is important to note that SARS will not automatically issue this letter, even where there is a previous cessation application under the “old regime”.  The letter is a new requirement as part of the financial emigration process and comes with further, and more strict verification methods and requirements.

Fear not, dear expat…

Although this sounds like a mountain of requirements, there are ways to navigate the process, any inconsistencies, and ultimately withdraw your policy without losing your mind. Here are some tips to help you:

1. Keep a written record of all communication: When you call your policy provider, make sure to take note of the date, time, and the name of the person you spoke to. Perhaps, send written confirmation of the conversation for your ease. This way, if there are changes their requirements, you can refer back to previous communication and hold them accountable.
2. Ask for EVERYTHING in writing: If your policy provider is being particularly inconsistent, ask them to confirm their requirements in writing. This will allow you to have a clear record of what is being asked and by whom, and you can refer back to it if needed.
3. Don’t be afraid to ask questions: If you’re not sure why they need a particular document or fee, don’t be afraid to ask. Ultimately, it is your policy, and you have a right to understand what’s going on.
4. Consult a professional: If you are still struggling to withdraw your policy, consider consulting a professional, such as a financial advisor or an expat tax professional. They can help you navigate the process, alleviate the administrative burden and ensure that you’re not being taken advantage of.

Inconsistencies in policy provider requests can be frustrating, but with a little patience, persistence and these handy tips, you can withdraw your policy and be well on your way.

As with most things in life, the exact requirements may vary depending on your individual circumstances and the specific policy provider’s process. Therefore, it is always best to consult a seasoned expat tax professional to guide you on this journey.