How to get your money out of South Africa
Many South Africans find themselves considering opportunities abroad, but moving their funds abroad can be a confusing process.
According to Nikolas Skafidas from Tax Consulting SA, many South Africans are looking to move overseas, whether it be for career advancement, lifestyle changes or retirement.
That said, a comprehensive understanding of ceasing tax residency and exchange control regulations is essential in moving abroad.
Financial emigration is the formal process for relocating abroad permanently, and it requires obtaining a non-resident tax status letter from the South African Revenue Service (SARS).
“South Africa’s tax system is residence-based, meaning residents pay taxes on global income. Transitioning to non-resident tax status involves formal declaration to SARS and ongoing compliance with tax and exchange control regulations,” said Skafidas.
“The SARS notice confirms cessation of tax residency and specifies the date. Once deemed a non-resident for tax purposes, individuals are only required to declare and pay taxes on income earned within South Africa and adhere to regulatory requirements set forth by SARS and exchange control authorities.”
In addition, South Africans emigrating need to be cognisant of South Africa’s exchange control regulations, overseen by the South African Reserve Bank (SARB). These regulations are crucial for managing capital flows in and out of the country.
Skafidas said that the following has to be considered in terms of the nation’s exchange control regulations:
- Changing tax residency status requires corresponding adjustments to banking status as per SARB mandates. When one is no longer a tax resident in South Africa, individuals must update their banking status by converting bank accounts to non-tax resident status.
- All transfers are subject to exchange control approval and clearance by the SARS. Transferring South African assets upon ceasing tax residency may not be straightforward. For instance, cashing out retirement policies after maintaining non-tax resident status for at least three consecutive years necessitates the authorized dealer verifying the source and available Tax Compliance Status (TCS) PIN.
- The treatment of fund transfers depends on the nature of funds, whether classified as capital or income. For those transferring proceeds from capital assets sale, they need to provide an AIT TCS PIN from SARS to authorized dealers.
South African residents can transfer up to R1 million out of South Africa annually through their Single Discretionary Allowance (SDA) without SARS’s clearance.
That said, anything above the limit will require an Approval International Transfer (AIT) TCS PIN from SARS.
Non-residents, on the other hand, can transfer up to R1 million as a Non-Resident Travel Allowance (TA) in the year in which they formally cease tax residency. However, this is a one-time allowance and cannot be used in the following years.
Moreover, individuals can no longer be eligible to make use of the SDA when tax residency is ceased.
“Therefore, all capital transfers out of South Africa, except for specific exceptions, need SARS approval through means of obtaining an AIT TCS PIN. It is important to distinguish between TA and SDA, as any remaining SDA balance can’t be used under TA,” said Skafidas.
“For any transfers exceeding R10 million, approval from the Financial Surveillance Department of SARB is additionally required.”
“This triggers a comprehensive Risk Management Test, including tax status verification, assessment of funds’ source, and compliance with anti-money laundering and counter-terrorism financing requirements.”
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