In order to answer your question, we had to make some assumptions and came up with a few possible scenarios:
Scenario 1: You are no longer resident in South Africa, but the insurer is a South African insurer
This could be an old policy taken out while you were still living in South Africa. If your wife still has a local bank account, the product can be transferred to the SA account, after which it can be sent abroad. Depending on its tax residency status, it may be subject to exchange control limits.
A South African citizen can take up to R11 million offshore per year, subject to tax clearance from the South African Revenue Service (Sars). The authorization is a formality and will generally be granted to anyone whose tax affairs are in order with Sars.
|Discretionary allocation of Rand 1 million||Foreign exchange investment allowance of Rand 10 million|
|South Africans are allowed to transfer up to 1 million Rand offshore per calendar year without having to obtain a foreign tax clearance certificate. This amount is covered by your annual discretionary allowance||South African residents or South African citizens living abroad who have not yet officially emigrated in terms of exchange controls (also known as financial emigration) are entitled to use the allowance foreign investment of R 10 million.|
If you and your wife have fulfilled all the conditions for financial emigration and are no longer tax residents in South Africa, the insurer may make payment abroad directly, according to their internal payment policies. They will likely send rand overseas, allowing your wife to convert the currency to the local currency once she receives it. They may, however, require that a non-resident bank account be opened in South Africa and that proceeds be paid into that account. From there, funds can be transferred abroad without limitation, in the currency of their choice.
Scenario 2: You are temporarily offshore, you are still a taxpayer / resident in South Africa and the insurer is a South African insurer
Policy proceeds will need to be paid into your wife’s South African bank account and may then be withdrawn abroad through the normal exchange control process and subject to the standard limits described above.
Scenario 3: Offshore insurer
At present, South African citizens cannot purchase a policy from an offshore life insurance company that is not registered in South Africa within the meaning of the Long Term Insurance Act. . However, if you have dual residency in a foreign country, you may have a policy underwritten with a foreign insurer.
In this case, the foreign insurer will pay the proceeds directly to your wife’s offshore bank account and the receipt will not be affected by the exchange control limits.
Your query might seem fairly straightforward at first glance, but as you can see there are a lot of “ifs” and “but” s in our answer. This is because there are so many variables, and the answer will depend a lot on the finer details of your tax and residency status.
The tax treatment of the product will also be affected by your personal residence situation.
For added peace of mind, we recommend that you contact your insurer directly for written confirmation, and then consider discussing their response with a financial advisor to ensure the policy is still appropriate for you. particular.