Financial emigration- South African companies wanting their pound of flesh before you go

Financial emigration- South African companies wanting their pound of flesh before you go

With the new tax laws coming in next year there are a lot of people (like myself) that will be looking into doing financial emigration. I am writing the below to educate people as to what is out there.

It was around last year October when I first enquired about financial emigration. Having not a lot if information I looked on google (as one does now days) and found the only company which seems to dominate the Google website on South African emigration, FinGlobal. So I made an enquiry with them.

A kind gentleman asked me for some documents and gave me a call in the U.K.

My circumstances are as follows: 1. All taxes up to date and have a good tax standing certificate 2. I have less than R300k of investments left in SA. 2 RAs and a preservation fund.

In the meantime one of my friends banking with Investec had just gone through the process of financial emigration and she Investec charged her R12k.

After consideration of my documents the gentleman at FinGlobal gave me a call, he said that his fee would be R26k. I told him Investec charged my friend R12k so I want to know what he is charging more than double for. He said that they would deal with SARS on my behalf and if I had any outstanding tax debts they would be able to deal with them. I told him that I won't have that issue. My taxes are up to date and there won't be any fines or penalties from SARS. I even sent him my tax good standing certificate. He said you never know many clients don't know they have outstanding debts. Clearly trying to make a sale and rob me blind. I said no thanks but yet he still emailed me a week later to ask if I wanted to consider their service. I of course said no thank you.

So onto my enquiry with Investec. Investec is the bank I bank with, the bank I have a relationship with, and so I thought that if I am going to do this through a bank, then it needs to be my own bank. By this time it is November. Investec quoted me R8k. They are the bank I bank with, they were charging me less than R26k and less than R12k. So I accepted.

First mistake is that I thought Investec were charging based on a % of asset value and that is why mine was less than my friend of R12k. Secondly mistake, thinking I had to go with the bank I bank with.

I joined this Facebook group a while ago. I am not that activate on FB but one of my friends saw something on the group and sent me a link to it. That is where I suddenly saw people commenting about the financial emigration process. 1. People (like me) struggling to find information as to what to do and what the process really entails 2. People providing recommendations of the companies and process that have been using. Some people claimed to have done it themselves (which is impossible, you need a financial institution to set up a blocked foreign account). However, this is where I started seeing people raving about FinGlobal. Some said they had saved them R21k in tax debt. Others like me said they were a *******. By this time I had already got SARS clearance without any tax obligations, fines, penalties etc. FinGlobal would have been a complete ******* for me because as I said, I had no outstanding tax debts. This is the first company that has failed to see how to price this process. I am sure they are worth using if you have complicated circumstances, but mine are clearly quite simple and their price was not reflective of this.

But then I started seeing people saying that their banks were charging between R1500 and R2500. FNB charges R1500, ABSA around R2000 all depending on individual circumstances, but these are their starting rates. So I emailed Investec to ask why they are charging me such a high fee in comparison to the other banks. I also enquired as to how they determined the fee (i.e.is it % of assets) because my friend and her husband were being charged R12k. Turns out they were being charged R12k together even though her husband does not bank with Investec. So they were basically getting the service for R6k each. Still much higher than the other banks. Investec argue that that it is 1 application per family and that is how they determined that fee, however, SARS will still see them as two separate individuals with two separate tax numbers for tax purposes.

I received an email back from the lady dealing with my emigration saying the following:

“We are aware that our fees are higher than any other banks, because we offer personal interaction with our clients.”

Well I can say that there is been very limited personal interaction from Investec. I have people emailing me (not bothering to tell me who they are, how they fit in the process), my complaints were never escalated to senior people. They were sent to a relationship manager and my private banker, and the woman dealing with the emigration whom I had been emailing just kept referring my enquires to these two individuals who have no experience with emigration or what the process entails, so they start making stuff up and have no power to do anything. A complete waste of my time and breathe.

The emigration woman followed on with the following in her email:

The fee quoted to you does not include the SARS process as it falls separate from the SARB process, below includes some or all of the services we provide for emigration:

• Providing emigration advice. I have not received any advice from Investec. They could not even tell me what documents I need to give to SARS). The biggest headache of this process is SARS. I have a very simple case, but there is no information as to what SARS wants or needs. So I spent hours on the phone until eventually someone at SARS said all they were asking for was a personal balance sheet in word from me. Quite simple, and I would have hoped that when I asked Investec what SARS were asking for that for, that at their very premium fee they would know. While I can understand that they are not qualified to provide any advice with regards to the tax liabilities you would think they would at least know what to send to SARS since it is part of the emigration process and in my opinion would have been a value add to know and would have saved me heaps of time.

• Collating of all the relevant documents In my case this would not take long as I have already done this for them.

• Attesting the MP336(b) form This is just stamp, not worth R8k.

• Compiling the emigration application for an onward submission to SARB Can’t take that long I have 3 funds, sent SARS clearance

• Opening of non-resident and/or blocked accounts Opening a bank account does not cost R8k, some banks do this for free and since I am on Private banking it should have been part of the value added service they provide. I have yet to find out what the monthly fees on this account is.

• Issuing letters where necessary to the relevant institutions There were two 1 page letters. 1 to Discovery and 1 Emigration confirmation letter. These would have been on word templates and would not have taken a lot of time, again is not worth R8k.

• Monitoring of non-resident and/or blocked accounts on a daily basis Woo Hoo someome sits and waits for an email from SARB, again, not R8k.

• Adhering to SARB requests There were none my case was always going to be simple.

I respond to the email and instead of the emigration team picking up the phone or escalating the issue, my private banker calls me, she has never spoken to me before and she spends 30 minutes on the phone trying to justify Investec's fee. She tells me that the process is “much more complicated” and I do not know what goes on behind the scenes. She further tried to tell me that I get the individual service of 3 people assigned to my case and a private banker. Apparently all their clients are very happy with their service and happy to pay their fee. I am sure they probably do not know what other banks are charging.

10 minutes after this call I called Bidvest only to learn that I do not need to bank with them to do this process. Their fee is between R1212 and R2500 (so between 5-6 time lower). When I explained my case to Bidvest, they said that is a very basic vanilla case, not that complicated and would cost me probably R1212 (5.3 times lower than Investec). I would also be assigned a Private Banker who would help me with the process. This completely just disproved what my private banker said in a matter of 10 minutes. I then relayed this information to my private banker in an email, instead of getting a response from her, I get a response from another person, someone I thought would at least be more senior, but turns out to just be the relationship manager. This man has never spoken to me, and didn't introduce himself, and didn’t bother to pick up the phone and call me. He basically said R8k is Investec's minimum fee for the process, I've signed and agreed to it so I should now just deal with it. I responded to him and he never bother to follow up with me, call me, escalate my concern. I am not going to chase Investec from the U.K. This was 2 months ago!

The service I get from Investec is no more superior than any other bank I have banked with. They are not charging for a service they are charging for their brand. Their service they provide for financial emigration is not different to Bidvest or any other bank for that matter. Investec know they have high net worth individuals that earn buckets of money so they clearly feel it is justified to charge them a ton more? I am actually not one of those people. I am defintelt not one of their high earners. I have this account because I am CA and they offered it to all CA(SA)S. However, they are exploiting people here. They have charged me for a Roll-Royce but in reality I have received a VW Citi Golf. If I am paying Roll- Royce prices I expect Roll- Royce service, but to date I have just been given the run around.

Investec issued their invoice for R8k two weeks ago. I am still in a battle with them. I had a call with the relationship manager yesterday whom I thought was someone important and can actually do something about the situation, only to learn that he is just a relationship manager and can do NOTHING and clearly knows nothing about the emigration process. He also said the following: “Investec’s fees are not market related”. Yes, we all know that, but the service I received would have been no different to any other bank and so I can not see how they can justify this. spoke to the lady in emigration for the first time yesterday (after enquiring as to why she has never bother to pick up the phone and call me). Investec clearly not living up to this so called “individual client service”. The wrong people have been in contact with me, there has been no escalation to senior people. Now they say they will reduce the fee to R6k, which is still unacceptable in my opinion. It is still 4.9 times higher than Bidvest. Invesetc has failed to see how to price this and has not treated me like an individual, but rather just like another one of their high net worth clients that they can take their pound off flesh from.

I have since enquired with a friend that works at a tax consulting company and gave her my facts and circumstances. She also said that my case is very simple and vanilla and she advised me that for around same fee as Investec’s they would have advised on my tax liability (had I had one) , they would have been able to answer my questions about what SARS wanted when I asked Investec that could not answer. If I had more complicated circumstances they would have advised and assisted with any Tax related matters as well. They also base the fee on individual circumstances (i.e. based on time and effort required). Unlike FinGlobal and Investec.

The next headache I have had is with Discovery and trying to get a tax directive. Again, Investec can’t even tell you what this process is. It is not a case of them being able to do it, but it would have been helpful if they could advise as to who is responsible for what in the process. But no once again, I must spend hours researching and figuring it out on my own, for R8k it really is not worth it.

Discovery sent me a completed Form B and C for my tax directives around 1 month ago now. I phoned them and asked them what to do with them. They said that it is the tax payers responsibility to get the tax directive and this can be done in 2 ways.

1. Through a registered tax practitioner or tax consultant by giving them power of attorney, they also said I can do this myself through e-filing; or 2. Give a third party provider that they use SPPOA but they charge R1500 per fund (for me this would be R4,500).

So I decided to opt for option 1 and try this on my own. I could not do this through e-filing as the “emigration” option was not available. So I called SARS. SARS made it clear that it is the funds (i.e Discovery) responsibility to apply for financial emigration and they were shocked to hear that they are charging a fee for this, they had never heard of this before. I asked them if I could get a tax practitioner to do this for me and they said I would be wasting my money as only the fund (i.e. Discovery) can do this.

So I called a tax practitioner for help and consulted PwC SA. Both PwC and the tax practitioner confirmed that SARS is 100% correct. It is the responsibility of the fund i.e. Discovery

The obligation to apply for the tax directive lies with the fund administrator (i.e. Discovery). Neither the taxpayer (you) nor a tax practitioner representing you can submit a tax directive application form. It can only be done by the fund administrator and they are legal obligated to do so under the 4th Sch of the Income Tax Act (para 9(3)). (FYI - For purposes of the 4th Sch, a fund administrator is included in the definition of “employer”, a lump sum withdrawal is included in the definition of “remuneration”, and you would constitute an “employee” as this includes any person who receives “remuneration”. Para 9(3) places the obligation on the “employer” to ascertain from SARS the amount of tax to be withheld from your lump sum withdrawal.) Discovery were insistent that it is the taxpayers responsibility, 3 different people insisted that it was, and the other option is to pay them R1500 (which goes to a tax practitioner who does this on their behalf.). They insisted that SARS was wrong, as well as PwC and the tax practitioner. I asked them to put it in writing that it is my responsibility so I could send it to SARS and PwC, and of course they would not do that (even though 3 separate people told me it is my responsibility). I asked them why they were charging me a fee for early withdrawal due to emigration and how this would be different to if I was at retirement age or if this was a divorce order and this process of getting a tax directive is the same. I sent them the SARS guidance, the section of the act which clearly says it is their responsibility. I told them to consult their legal team and tax department and told them I will have a call with them and with my friend that is a tax practitioner. Turns out Discovery’s i-tax system is not up to date and they do not have the option on their software to apply for emigration withdrawal. This is a software issue with the fund. So Discovery have been outsourcing this to a tax practitioner who has been charging a fee and Discovery have been on charging it to their clients. So this tax practitioner has been profiting big time from this deal. Discovery have since conceded that it is their responsibility to apply for the tax directive and the cost should not have been passed onto the client. The issue is all the poor souls before me that have been charged for this because they do not understand the process. Most people are too scared to question what they are paying for and what they are getting. People are also scared of SARS and do not know what to do, so they just rather pay someone to take on the responsibility. I have spent hours on the phone to South Africa from the U.K. These are not cheap calls. All of these companies have wasted hours of my time and my money and I am extremely disappointed that there is not more out there to educate people about the process. In summary. 1. Do not use Investec as your bank of choice unless you want to be ********** 2. This can be done with any bank in SA not necessarily your own bank. Make some calls and find out who is cheapest, what the bank actually does is very simple. Do not let them bamboozle you into thinking it is more complicated than it is 3. If your circumstances are as simple as mine, you only need to send SARS the attested MP336(b) form, proof of your assets and liabilities, and the part I did not realise they want, a 3 years comparative balance sheet. The balance sheet can be done on word by yourself and does not need to be signed off by an accountant. 4. If you have complicated circumstances (i.e. you have some trusts, you are going to suffer withholding taxes, large assets and liabilities with some remaining behind) I can highly recommend the people at Think –Tax. 5. SARS is not that scary, call them if you get stuck, they will help you. If I can do it from the U.K. so can you 6. If you have investments, it is the funds responsibility to apply for a tax directive. 7. My circumstances may be too simple to pick up what other issues could have arisen. I suggest that you assess your own individual circumstances first. If they are simple like mine a lot of the SARS process can be done on your own. If you suddenly get stuck or realise that you need professional help then call professionals. If you have lots of complicated assets and liabilities call in the big guns immediately (i.e. not a bank, a professional).