When it comes to South Africa’s exchange control and taxation systems, big changes are underway. As the country modernises its systems, it is vital for South African expats to stay informed about the evolving regulations that are at play in international money transfers from South Africa. To ensure you’re up to speed on the changes as they happen, this article will take a brief look at what is now involved in moving money out of South Africa, with a focus on the key amendments introduced by the South African Revenue Service (SARS).
Financial emigration vs tax emigration
You might be familiar with the phrases ‘financial emigration’ and ‘tax emigration’. Financial emigration and tax emigration are often mistakenly used interchangeably, but they represent distinct processes. Financial emigration specifically refers to the process of terminating one’s exchange control residency with the South African Reserve Bank (SARB) to acquire non-resident status for exchange control purposes. This allowed expats to cash in their retirement annuities early and create a free flow of capital out of the country. This process was phased out on 01 March 2021. SARS stepped in, replacing financial emigration with tax emigration, in terms of which expats could apply to the revenue authority to cease their tax residency with South Africa, to become a non-resident for tax purposes.
Once SARS has approved and noted an expat’s non-resident tax status, that individual is no longer subject to foreign income tax (i.e they are no longer expected to pay expat tax in South Africa) and they are no longer subject to the same exchange control rules as tax residents. Non-residents are also permitted to withdraw their retirement annuities after having maintained their non-resident status for a period of not less than three consecutive years.
How to become a non tax resident of South Africa
In order to cease your tax residency with South Africa, you must no longer meet the requirements of tax residency as determined by SARS. You must have permanently physically relocated from South Africa with no intention to return.
You will undertake the process of tax emigration, which involves submitting a Declaration of Cease to be a Tax Resident to SARS. SARS will request that you upload documentation that supports your assertion that you no longer qualify as a tax resident. SARS will assess your case, and if all signs point to the fact that you do not intend to return to South Africa, you will be granted a status change to non-resident for tax purposes, after you have paid any exit tax owing.
How are non-residents taxed in South Africa?
Once you become a non-resident for tax purposes, you no longer have to pay South African tax on foreign income. You can only be taxed on income sourced in South Africa.
What has changed when it comes to moving money out of South Africa?
In April 2023, the South African Revenue Service (SARS) introduced a significant overhaul to the process of transferring money out of the country. Previously, individuals seeking to transfer funds abroad had to navigate different application categories such as “Emigration” or “Foreign Investment Allowance.” However, SARS consolidated these various channels into a single, unified framework known as the Approval for International Transfers (AIT) process.
While the process has changed, different exchange control limitations apply to residents and non-residents, which dictate the tax clearance protocol involved. Tax residents can use the Single Discretionary Allowance to move up to R1 million out of South Africa per calendar year, in addition to R10 million under the Foreign Investment/Capital Allowance. Tax residents can utilise the Single Discretionary Allowance once per year, without prior tax clearance from SARS, while non-residents must obtain tax clearance for all amounts, with a few exceptions.
For transfers that do not involve the Single Discretionary Allowance (i.e: tax residents moving more than R1 million or non-residents seeking to move any funds out of the country) it is necessary to use the Approval for International Transfers (AIT) process through SARS.
What information is required when making an AIT application with SARS?
The SARS Approval for International Transfer (AIT) process now requires significantly more detail than in the past. Applicants must provide comprehensive information about their financial situation and tax residency.
- Key information that SARS is looking for to determine your tax compliance status:
- Tax residency status: Clearly state your tax residency status with SARS, and provide proof thereof. Non-residents will need to supply the Non-Resident Confirmation Letter received at the end of your tax emigration.
- Financial information: Disclose the origins of the funds being transferred, as well as a detailed overview of your local and foreign assets and liabilities.
- Additional disclosures: You’ll also need to declare, while applying for your AIT TCS PIN, if you are a trust beneficiary, hold a direct or indirect shareholding of 20% or more in any local or foreign entity, or have any outstanding loans to local or foreign trusts.
This increased level of disclosure aims to improve transparency and ensure compliance with South African tax laws.
What is an Approved International Transfer TCS PIN?
An Approved International Transfer (AIT) Tax Compliance Status (TCS) PIN is a number issued by the South African Revenue Service (SARS) to verify that a taxpayer’s tax affairs are in order before transferring funds out of the country.
Here is the lowdown on the SARS AIT TCS PIN:
- Purpose: It is required by authorised financial institutions to process international money transfers.
- Process: To obtain an AIT TCS PIN, you need to apply to SARS, providing details about your financial situation and tax residency.
- Recent changes: SARS has simplified the process for long-term non-residents by removing the requirement to disclose foreign assets and liabilities. Additionally, the AIT approval now clearly states the taxpayer’s residency status at the time of approval.
Read more: Important documents and requirements for transferring money before and after leaving South Africa.
How long does the AIT process with SARS take?
SARS aims to process AIT applications within 5 to 21 business days. However, this timeframe is a general guideline and can vary depending on the complexity of the case.
- Simple applications without the need for further investigation are typically processed within 5 business days.
- Complex applications requiring additional verification may take up to 21 business days.
To avoid unnecessary delays, ensure that your application is complete and accurate. It is highly recommended that you consider seeking professional assistance to navigate the complexities of the AIT process.
Read more: Avoiding common pitfalls when transferring funds abroad from South Africa.
FinGlobal: cross-border financial and tax specialists for expats
Understanding your tax residency status and its implications for how the exchange control rules apply to you when moving money out of South Africa can feel complicated. That’s why FinGlobal is here to streamline the process for you, ensuring that you can make international money transfers with minimal hassle and delay. We’re ready to assist you every step of the way with tax emigration, tax clearance, foreign exchange and more.
To find out more about our convenient, trusted services for South African expats, leave your contact details below and we’ll be in touch to discuss your requirements.