The Financially Independent Permit (FIP) grants direct access to permanent residence status in South Africa for the high net-worth individuals and business people, therefore offering them the flexibility to conduct business and any desired activity or even retiring in South Africa. Access to and security of their long-term investments is guaranteed once they have permanent residency. They also have the added advantage of being able to enter and exit South Africa freely with minimal restrictions thus enjoying their retirement with a peace of mind
The FIP is the perfect permit for those foreign migrants looking to migrate to South Africa as retirees and can sustain themselves without an income within the country.
Not having the Financially Independent Permit means that if you want to stay in South Africa as a retiree, you first need to obtain a temporary residence visa which requires subsequent periodic renewals for your continued stay in the country. Should you wish to stay longer, then you need to lodge a separate permanent residence application, which will take at least 18-24 months to be issued. You also need to prove that you have sufficient life-long income for your permanent residency.
There are thus two permit/visa options for prospective retirees in South Africa:
- Retired Persons Visa (temporary visa) followed by Permanent Residence Permit
- Financially Independent Permit
WHAT IS THE RETIRED PERSONS VISA?
In terms of the South African Immigration Act, a foreigner who intends to retire in South Africa may apply for a Retired Person’s Visa which is issued for a period of up to four years. The premise of this visa is that the foreigner is not looking to work, study or conduct any business in South Africa. Their intention is to retire in South Africa. However, those retirees who can demonstrate a net worth of R12 million can also qualify for the Financially Independent Permit, which grants them direct residence to South Africa. They may then retire in South Africa as there are no specific limitations on the activities that can be undertaken on this permit.
The Retired Person’s Visa is issued for a maximum period of four years and is renewable, upon application, for a further four years. The visa can be renewed indefinitely, and the same requirements must be met each time an application for an extension is submitted.
QUALIFYING CRITERIA FOR THE RETIRED PERSON’S VISA
Establishing whether you meet the qualifying criteria for the Retired Person’s Visa can be quite challenging as only certain types of income and capital are allowed. The following are the basic requirements for the Retired Person’s Visa:
R37 000 per month to be available for the duration of the visa
This can be in the form of cash, cash equivalents or cash income generated by capital asset(s), property rental income or pension. This is proved by:
- Pension or retirement income
- Annuity income
- Combined assets
- Interest earned
- Rental income
- Dividends
- Profit shares
No age restrictions
There is no minimum or maxim age restriction
Temporary and Permanent categories
Applications for retired persons can be made initially for a temporary residence visa and then subsequently for a permanent residence permit
Income and capital
Both income and capital can be used when a temporary or Retired Person’s Visa are made. Pension, retirement or an irrevocable annuity and other lifetime guaranteed income can be utilized when applying for Retired Person’s Visa
FINANCIAL REQUIREMENTS – FINANCIALLY INDEPENDENT PERMIT AND RETIRED PERSONS VISA/PERMIT
- Both the Retired Person’s Visa/Permit and the Financially Independent Permit focus on the applicant’s ability to be able to support themselves financially. The idea is that holders of these permits are not a financial burden to South Africa and are able to live in South Africa comfortably.
- The Retired Person’s Visa is a temporary residence visa valid for four years and can be achieved by demonstrating either R37,000 per month in guaranteed income or a capital sum equal to R444,000 per annum (R1,776,000 for the full four-year eligibility) or a combination of both.
- A Financially Independent Permit requires the applicant to have a net worth of R12 million, and the applicant must pay a once-off fee of R120,000.
Why the Financially Independent Permit is a better option than the Retired Person’s Visa/Permit
At first glance, based on the different monetary values of these two permits, one would automatically assume that it is better to apply for the Retired Person’s Visa because of R37 000 per month income requirement for each year compared to the proof R12 million required at the outset.
Current capital vs continuous future income
The Financially Independent Permit requires one to prove their current net worth of assets of a minimum of R12 million. This is in the form of assets such as property, equities or cash in bank accounts, etc. belonging to the applicant.
On the other hand, the Retired Person’s Visa requires the prospective immigrant’s future financial status and proving that they have sufficient means to support themselves for the duration (four years) of the visa can be daunting for most people.
The Retired Persons Permit is only granted for the retired person provided the rental income or pension income used as proof of funds can be proved to be life-long guaranteed. This can be difficult to prove.
This problem does not arise with the Financially Independent Permit as you only need to prove once that you have the assets of at least R12 million.
No need to transfer any funds to South Africa
Whilst the Retired Person’s Visa/permit requires R37 000 per month available for the applicant, in South Africa, for the Financially Independent Permit, the minimum net worth of R12 million is capital that only needs to be proven for the application, and there is no requirement to bring any amount of money into South Africa.
Tax implications on income vs capital
Although South Africa is tax-friendly for retirees, with numerous double taxation agreements in place and has no tax on foreign sourced pensions schemes, it also has very low capital gains tax rates compared to other jurisdictions This may make the Retired Person’s Visa seem attractive from a tax perspective.
However, it is important to note that there is no tax on the person’s accumulated wealth other than ongoing requirements in terms of income tax and capital tax, and only once a person is deemed a South African resident for tax purposes will there be tax implications.
If you are considering South Africa as a retirement destination and have the necessary available capital that a financially independent person would possess, why not apply for the Financially Independent Permit and save yourself time from having temporary visas which require constant renewal, the added burden of having to prove future income as opposed to showing your current net-worth, which does not need to be in SA?
With the Financially Independent Permit, you will get direct residency in South Africa and if your intention is to retire, you can safely do so. Should you wish to engage in any other activities in the future such as conducting a business, you will still be able to do so – unlike with the Retired Person’s Visa which will require you to apply for a special endorsement to work or do business in South Africa.
