South African retirees have come a long way – and are going a long way. Rather than banish themselves to the local old age home to toil over macramé, those with adequate financial resources are increasingly slipping on their Raybans, waving sayonara and flying off into the sunset.
These sunsets are increasingly in Portugal, Mauritius or Malta, all of which are welcoming qualifying South Africans with open arms.
Many are looking for tax-efficient economies and an enhanced quality of life, or just a more exotic lifestyle, and some want to be closer to children relocated in Europe or the UK.
Transferring money offshore is no obstacle. South Africans are able to take out R10 million annually (R20 million for couples), plus their R1 million discretionary allowance. And South African citizens are allowed to hold a second citizenship.
Here are the implications, the tax breaks, and the incentives.
Why Portugal? Portugal has a Mediterranean, sunny climate, is safe, with a thriving economy, has over 100,000 foreign retirees who speak English, over 40 golf courses just in the Algarve region, good food, and a relatively low cost of living. The rest of Europe and the UK are easily accessible.
Incentives: In 2010, the Portuguese government introduced the Non-Habitual Residency Programme (NHR) to attract nonEU residents to the country. Under this, certain types of income
– including your SA pension, interest, dividends and royalties
– are exempt from any tax in Portugal for 10 years. Yes, you’ll have to live in the country for more than 183 days of the year, but it’s not mandatory, under this scheme, to purchase a property. Renting is permitted.
Tax talk: You won’t pay Portuguese tax on any South African pension, dividend or annuity income under this programme. There is no inheritance tax, so you can bequeath the Villa Casa to your children without them paying the earth for it. Gifts or inheritances received by spouses and direct descendants are exempt from estate duty. Any Portuguese-sourced income will, however be taxable. Capital gains are still taxable.
Eligibility for NHR status: South Africans will have to become resident in Portugal, as well as be a tax resident and own or rent property in the country. You cannot have been a resident before in order to qualify. Over 6,000 South Africans have been approved so far.
While you may not be employed in Portugal, your South African business interests are perfectly legitimate in the NHR system.
How to make it happen: Apply for a residence permit within six months of arriving in Portugal on your long-term visa or Portuguese residency visa. The permit is renewable every two years and, after five years, it can be converted to a permanent residency permit, after which you can apply for an EU passport that lets you travel freely in Schengen Europe.
Golden Visa: Another option for the well heeled is to apply for a Golden Visa, which offers a fast-track to obtaining a residency permit in Portugal for non-EU investors. This includes the purchase of real estate property worth at least EUR 500,000 (about R8 million), or EUR 350,000 (about R5.6 million) for properties located in urban regeneration areas or properties more than 30 years old.
Bonus ball: A recent study on 13,000 respondents across 166 nationalities showed Portugal at first place for offering expats the best quality of life of any country around the world.
Why Mauritius? Mauritius has a pleasant tropical climate – except for the odd cyclone, but they are usually predicted early enough so residents can batten down the hatches. There are plenty of expat clubs, and water sports like fishing, sailing or just lolling around on the white sand make for easy living. Mauritius offers well-equipped hospitals and clinics.
What to do: If you’re over 50 years old, apply to the Board of Investment (BOI) for a residence permit. And scour the property pages; successful applicants are eligible to acquire property in Mauritius.
Incentives: New retirees are required to transfer at least US$ 40,000 (about R574,000) to their local bank account in Mauritius annually. To qualify for a permanent residence permit – valid for 10 years – you’ll need to have had a residence permit for three years, and have transferred the US$ 40,000 annually to your account in a local bank during each of these three years.
Property baron: If you’re a real HNWI (High-net-worth individual), circumvent all the procedure above and obtain residency by buying property to the value of $500,000 (about
Tax talk: A double tax agreement between South Africa and Mauritius prevents double taxation. There is no inheritance tax in Mauritius.
No work, only play: Retirees are forbidden to work, and may not be a majority shareholder or director in a locally incorporated company.
Bonus ball: Mauritius is increasingly being regarded as one of the leading African markets for foreign investors, and last year The World Economic Forum ranked Mauritius as the most competitive market in Africa.
Why Malta? Malta means sunny Mediterranean living with a pleasant climate throughout the year. Though just 80 kilometres south of Sicily, you won’t need to talk with your hands – as a former British colony, English is an official language in Malta. And happily for South Africans, drivers drive on the right side, i.e. on the left-hand side, of the road. Healthcare is good. The ethos of the island is encapsulated by a Maltese saying – ‘mela mela’ – which means ‘no stress’.
Incentives: The country offers a few incentives for non-EU foreigners wanting to reside in Malta, including the Maltese Global Residence Programme (GRP) launched in 2012. To qualify, you are required to either buy property starting at EUR 220,000 (about R3.5 million) or rent to the value of around EUR 800 (about R13,000) a month.
Travel deal: Residency means you can spend a maximum of 90 out of every 180 days in any of the Schengen zone countries offering an attractive travel benefit to SA passport holders.
Tax: There is no such thing as wealth taxes, rates or council taxes in Malta. The GRP means a special tax status, qualifying residents for a flat rate of 15% tax. The minimum tax payable annually is EUR 15,000. There is a double tax agreement between SA and
Bonus ball: Malta’s GDP growth remains strong. It’s a modern, service-orientated society with ancient walled cities and gorgeous beaches. Malta has consistently been voted best place to retire in a number of international surveys.
Says Jorine van der Merwe, tax compliant consultant at FinGlobal:
‘Before retiring abroad, South Africans must decide whether they are going to remain a tax resident or a nontax resident in South Africa. Some countries have a double tax agreement in place with South Africa to avoid any double taxation.
‘Whether you are a tax resident or a non-tax resident, you will always first be taxed on your SA pension income.
‘Dividend tax will also differ depending on whether you are a tax resident or a non-tax resident. If you are a resident for tax in SA, you will be paying 20% withholding tax (deducted at source) on dividends. If you are a nonresident for tax, you are subject to a reduction in the rate in terms of a double taxation agreement.
‘See a tax practitioner in South Africa as well as in Mauritius, Malta and Portugal to plan ahead.’