Need-to-know advice for HNWIs emigrating to the US

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 three 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. 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 two 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 above 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 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.

George Ganey is founding partner at Ganey Law Group, Tax Consulting SA.