18 not-so-obvious costs that you may want to consider before deciding on emigration.
The decision to emigrate to a foreign country is never one taken lightly. From a financial planning perspective, there is an enormous amount of work that needs to be done to ensure a smooth financial transition. Unanticipated and hidden costs associated with your intended move – compounded by the currency conversion – can throw your plans off-kilter.
Here are some not-so-obvious costs that you may want to consider before deciding on emigration.
Before making the life-changing decision of relocating permanently to a foreign country, you will likely visit the country first to do some scouting around, set up some interviews, investigate the business and/or work opportunities, visit schools and get a general feel for the country. You will need to take into account the costs of flights, tourist visas, hotel accommodation as well as the increased cost of living while you are there.
The time factor
What is often not factored into the budgeting process is the enormous amount of time spent on the entire emigration process including administration and paperwork, consulting and queuing, overseas travel, reading and research, selling your home, packing, negotiating, getting quotes, selling furniture and enrolling your children in schools. This time can translate directly into a loss of income and earnings at a time where your expenses are mounting by the day. The lost opportunity costs associated with planning an emigration are difficult to quantify but should be considered when putting your emigration budget together.
Application and visa costs
The costs of applying for work visas and permanent residence varies from country to country, although generally include the actual cost of the visa and/or permit application, agency fees, biometrics, language tests, passport costs, medical examinations, police clearances, as well as an assessment of experience and qualifications. Some of these are upfront, whereas others are only payable later in the application process. Bear in mind that if your application to one country is not successful, these costs are not recoverable, and you will need to restart the process in respect of your country of second choice.
An important factor to consider when planning an emigration is the likelihood of what is referred to as a failed emigration. For those who choose the route of financial emigration, bear in mind that a financial emigration triggers a deemed disposal of your worldwide assets (excluding fixed property) for Capital Gains Tax. This means that you may be liable for CGT on assets which you only expect to dispose of at a future date. If you return to South African within five years of financial emigration, your situation will be deemed a failed emigration and all tax which would have been payable in South Africa will become payable retrospectively.
Packing and removal costs
The costs of packing up your furniture, appliances, clothing and personal belongings will largely depend on how much you plan to take with you. Emigration experts advise South Africans to be very selective when choosing what to take with them. When it comes to appliances, many don’t work in foreign countries where the voltage is different. Also, South African homes are much bigger than homes in other countries and many South Africans end up taking way too much furniture with them. On the downside, you are likely to sell your furniture and appliances in South Africa for a fraction of what they are worth, while having to pay full price in a foreign currency on the other side – and these costs should be factored into the equation.
When calculating your shipping costs, you will need to be bear in mind that your goods may need to spend some time in storage before leaving South Africa and again on the other side – depending on your timeline – and these storage costs should be accounted for. You will also need to arrange to have your goods insured during packing, unpacking, storage and transit.
Emigration consultant fees
If you choose to employ the services of an emigration specialist, you will need to factor these costs into your budget. These companies offer a wide range of services which include upfront assessments, visa applications, business relocation, legal advice, exchange control advice, permanent residency applications, immigration strategy service and even litigation. Depending on the complexity of your circumstances, these costs can be significant.
Travel and associated costs
You will naturally have factored flights and travel costs into your budget, but other hidden costs associated with physically getting to your new country include accommodation costs on the other side if you haven’t already found a suitable property. This could include the cost of short-stay rentals, hotels or Airbnbs.
Pet relocation fees
Every country has its own set of rules concerning pets – and some countries, such as Australia, require a period of quarantine for your pet. Besides for the cost of physically moving your pet to another country, you will also need to budget for vet fees, microchipping, vaccinations and rabies testing, import permits, quarantine accommodation and health certificates.
Estate agents commission
If you are selling your home and/or other properties, bear in mind that as the seller of the property you are responsible for paying the agent’s commission, which could be anywhere between 4% and 7%. As a seller, it is advisable to negotiate the agent’s commission upfront and in writing as it constitutes a sizeable chunk of money. Be sure to document exactly what it is the estate agent intends doing for you in terms of marketing and advertising your property, running show houses, publishing photos and videos online, and so on.
New vehicle and drivers’ license
If you plan on purchasing a vehicle in your new country, don’t forget to take into account the cost of vehicle registration and licensing which in some countries, such as Australia, can be enormous. You may also be required to convert your driver’s licence to a local one, and there will be costs associated with doing this.
The general cost of living
In general, the cost of living in other first world cities is higher than those in South Africa. According to Expatistan, which is a cost of living calculator that allows you to compare the cost of living between cities around the world, the cost of living in Toronto is 86% more expensive than Cape Town, with transportation and housing being the big cost drivers. The cost of living in Brisbane versus Cape Town is 72% higher, with housing being 63% higher in cost. Living in London will cost you 134% more than living in Cape Town with housing being 151% higher, transportation 236% higher and food 81% higher. Doing your research into the cost of living in your chosen city is essential before making any firm decisions to move.
Again, every country has its own set of rules regarding immigrants and health insurance. You may be required to pay an upfront surcharge before entering the country to have access to the country’s healthcare system. Your visa may also require that you hold private healthcare insurance, and it is wise to investigate the costs of like-for-like cover in your new country, taking into account any pre-existing conditions that you or your family may have.
Before emigrating, do your homework when it comes to school fees in your foreign country of choice as you may find that private education overseas costs a lot more than our local private schools. While you may qualify for ‘free’ education in your new country, the calibre of education might not be at the same standard. So, before assuming your child will be enjoying free education, make sure you are comparing apples with apples. According to the New World Immigration website, private schooling in Australia can cost anywhere between AUD 23 000 (R230 000) and AUD 40 000 (R400 000) per year. You will also need to add in the costs of new uniforms, stationery and other school essentials.
Utilities and services
When setting up your new home, you will likely need to pay deposits, installation and connection fees in respect of utilities and services, including fibre and networking connections. There may also be mobile and banking set-up costs that are worth investigating in advance. In particular, the costs of domestic cleaning services in countries such as Australia, Canada and the UK are extremely high and, if you intend employing the service of a cleaner or cleaning service, you will need to budget for these expenses.
Flights home to visit family
Another cost worth accounting for is that of air tickets to and from South Africa to visit family and friends. While you may have no intention of returning too soon, illness, weddings, funerals and other eventualities may necessitate a visit back home sooner than you’d like to.
Depending on where you moving to, it may be necessary to incur additional clothing costs. If you are moving to countries such as Canada or the UK, you will need to invest in boots, jackets, gloves and other items as a result of their much colder climate.
Financial emigration costs
Financial emigration effectively terminates your tax residence status with Sars, as well as your status as an exchange control resident with the South African Reserve Bank. Before undertaking a financial emigration application, it is important that you fully understand the consequences of doing so. For instance, if you complete the financial emigration process early in your efforts to move overseas, your local banking and access to credit will be affected as you will be considered a non-resident. As such, you will be subject to the lending laws governing a non-resident of the country. This, in turn, may affect your ability to transact and conduct your financial affairs efficiently.
If you are a member of a pension or provident fund before your normal retirement age and decide to emigrate, you are permitted to withdraw the full value in the fund. In respect of retirement annuities and preservation funds, if your financial emigration has been recognised by the South African Reserve Bank, you will be able to withdraw the full value of your fund. Bear in mind, however, that you will have to pay tax per the pre-retirement withdrawal benefit table.