Since the announcement by Treasury effective 1 March 2021 to the process of Financial Emigration and ceasing ones tax residency, the transfer of funds offshore for expatriates (emigrants as known under exchange control), has in some regards become more flexible, in terms of allowing you more than one authorised dealer, and on the other hand, way more complex, by restricting you in terms of your allowance.
New Rules Applicable to All
It is important to note that the changes announced, applies retrospectively to everyone who has completed the Financial Emigration Process. Thus, if you Financially Emigrated pre-1 March 2021, these law changes still apply to you.
More Complex – Let Us Explain
The additional restrictions means that you must comply with additional time constrains and additional approvals where needed.
All is not lost though, there are still various legal provisions allowing access and transfer of one’s funds offshore. Banks may allow the transfer of funds offshore, provided one:
- has ceased to be a resident (formally emigrated) for tax purposes in South Africa;
- has obtained a TCS PIN in respect of “emigration” and or Foreign Investment Allowance (FIA) from SARS; and
- is tax compliant upon verification of the TCS PIN
Various Offshore Transfers Available
Once off Travel Allowance
Individuals who cease to be tax residents of South Africa (non-tax residents) may in the same calendar year that they ceased to be tax residents transfer up to R1-million as a travel allowance (formerly known as SDA), without the requirement to obtain a TCS PIN. This is a once off allowance which cannot be used in the following calendar years. Unutilised portion of this allowance cannot be carried over to the next calendar year and may not be availed or gifted to residents.
Household and Personal Effects Items
Non-Tax Residents can export household and personal effects up to a value of R1-million using the SARS Customs SAD500 Declaration form within the same calendar year they ceased to be a resident for tax purposes. For items over the value of R1-million a TCS PIN will be required for the exportation.
Inter Vivos Trust Capital and Income Distributions
Offshore transfer of income and capital distributions from Inter Vivos Trusts can be done provided the Trustees obtain a Good Standing TCS PIN for the Trust. Distributions above R10 million will further require an FIA TCS PIN to be obtained by the non-tax resident individual receiving the distribution in addition to a Good Standing TCS PIN for the Trust obtained by the Trustees.
Offshore transfer of inheritance, gifts of up to R10-million by non-tax residents require a Good Standing TCS PIN to be obtained by the resident estate or donor. Any funds over R10-million will require in addition an FIA TCS PIN to be obtained by the person receiving the donation/gift.
Non-tax residents who are no longer registered for tax with SARS and receive an inheritance of up to R10-million are allowed to transfer the funds without any additional SARS clearance. Funds above R10-million, non-tax residents are required to obtain a Manual Letter of Compliance - Transfer of Funds from SARS.
Dividends, Directors’ Fees
Good news is, non-tax residents are allowed to transfer without a need for a TCS PIN from SARS dividends and director’s fees due to them provided they present a copy of the resolution by the board of directors of the remitting company confirming the amount to be paid to them.
Rentals, SARS Refunds
With the show of the source of funds, i.e., rental agreement, SARS statement of account showing the refund due, non-tax residents are allowed to transfer offshore these funds without having to provide a TCS PIN from SARS.
In summary, post 1 March 2021 most offshore transfers require a SARS clearance (TCS PIN) before they can be approved and transferred by banks. It is strongly advisable that you consult with an expatriate tax specialist firm to ascertain that you have the correct documentation, and you are following the legal route in transferring your funds offshore.
It is also worth exploring using an alternative Authorised Dealer to facilitate the transfer of your funds abroad which will give you the flexibility of obtaining better exchange rates for your funds and specialist forex service to assist with compliance in terms of exchange control.
Written by Lovemore Ndlovu, SARS and Exchange Control Manager at Tax Consulting SA; and Marisa Jacobs, Managing Director at Africorp Treasury