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Need-To-Know Advice For High-Net-Worth SA Families Considering Emigrating To The US

Need-To-Know Advice For High-Net-Worth SA Families Considering Emigrating To The US

March 26, 2023

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Many high net worth (HNW) individuals and families, as well as qualified professionals, are seriously considering emigrating from South Africa to the US.
Whether it is for work or to escape the country’s poor economic conditions and dwindling wealth opportunities, it’s a life-altering decision that shouldn’t be taken lightly. Or rushed into without the right guidance.

There are 3 main areas of concern anyone intent on emigrating to the US must consider to transition their lives smoothly and relocate their wealth safely. These are: visa options, a relocation plan and tax emigration.

Visa options

Typically, the first question is what options are available to allow entry into the US at all.

According to George Ganey, Founding Partner at Ganey Law Group in Washington DC, USA (Affiliated with Henley & Partners International), the most common residency by investment route is the EB-5 Immigrant Investment Program visa.

The EB-5 requires investment in an enterprise that creates jobs for US citizens. This is currently USD 900,000 for specially designated areas or USD 1.8 million for non-designated areas. On approval, the investor and their family gain conditional permanent residence and, after 2 years, can be granted a full permanent residence (green) card.

“The EB-5 visa is certainly the most effective for South Africans, as recent legal reforms offer greater protection to investors, more clarity around timelines, and other assurances,” says Ganey.

Although this is a common path, employees of existing or new branches of a multinational company may also enter the country through the L-1A or New Office L-1A visas respectively. Each of these visas can also result in permanent residence status.

However, Ganey suggests that, due to changes in law, the once viable E-2 visa is no longer appropriate for South Africans.

Relocation plan

Along with determining the means of entry, one has to carefully plan out the complex process of relocating their family, lifestyle, business and wealth to the US.

Sheldon Halcrow, President of Caleo Capital USA in New Jersey and a South African expat himself, says it starts with a needs analysis.

“Many people have their hearts set on the US without considering it’s a country of 50 independently governed states, each with its own unique economy and culture,” he says.

Employees go where they are sent. But, the independently wealthy should research which state holds the greatest business and investment opportunities for their needs, as well as tax benefits. This is on top of the lifestyle they want for themselves and their family.

It is also essential to develop a global asset inventory to highlight areas of concern, overcome regulatory obstacles and develop a wealth migration roadmap.

Lastly, they need to sequence their journey carefully since their transition to the US may happen in phases over the long term. So, scheduling and synchronising each step is critical.

“A sequencing document, along with regular reviews, ensures that when they land, much of the groundwork has already been done, like opening a bank account, having a US cell phone, or obtaining a means of ID,” says Halcrow.

Planning your “tax” exit from South Africa

How one exits South Africa is as important as gaining entry to the US, especially from a tax perspective.

This is according to Thomas Lobban, Head of Cross-Border Individual Tax at Tax Consulting South Africa. “You need to develop a detailed roadmap that clearly defines where you are coming from and where you want to go and contains a definite plan on how to get there,” he says.

Of the considerations at play, tax residency is of paramount importance. Yet, so many South Africans eager to leave seem unaware that their tax obligations do not automatically fall away after they exit our borders.

Even once in the US, they must still pay tax under South Africa’s residency-based tax system. So, they need to formally cease tax residency by informing SARS they have and providing it with objective evidence that they intend to reside outside the country permanently.

If they cannot, they may fall back on the double tax agreement (DTA) between the two jurisdictions to protect their foreign wealth from double taxation. The DTA must be formally applied during each year’s tax return.

“Such concerns need to be addressed in the planning phase because, after landing on US soil, it may be too late to revise your tax strategy,” says Lobban.

A synchronised effort

Emigrating to the USA demands careful planning and execution, with due consideration for requirements on both sides of the Atlantic.

Visa decisions, relocation planning and tax emigration are individually important. However, for HNW families, a successful transition depends on the integrated efforts of a multidisciplinary, intercontinental team of professionals with a shared vision, plan and roadmap designed specifically for them.

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Caleo Capital USA (Caleo Capital NA LLC) are an integrated wealth advisory and asset management firm that serves high-net-worth South African families who have relocated or are planning relocation to the United States. Emigration and relocation is complex both administratively and emotionally, with so many aspects to consider. Financial planning for the average high-net-worth individual is no simple task, but tax, retirement, trusts and estate planning is even more complicated when your financial life spans international borders. Caleo Capital has established relationships with reputable partners who assist with a range of challenges facing newly immigrated clients.

Caleo Capital USA (“Caleo”) is a State Registered Investment Advisor.  Caleo and its affiliated persons only conduct business in those states in which it is lawfully registered or exempted from registration. This material is for discussion purposes only, and Caleo is not soliciting any action based upon it. This material does not constitute, and is not to be considered, an offer to sell or a solicitation of an offer to buy any product, security, advisory, risk management, or other service mentioned herein. It has no regard to the specific investment objectives, financial situations or particular needs of any specific recipient.  This material is not to be construed as investment advice nor is it intended, to constitute legal  or tax advice. Be sure to consult with  legal and or tax professional before implementing any strategy. For information regarding Caleo’s business operations, services, fees and registration status, please contact the firm or visit https://adviserinfo.sec.gov/ and search for Caleo  or for CRD #308542.