Exchange Control and Tax Residency in South Africa

By: Lovemore Ndlovu, Head of SARB Engagement and Expatriate Compliance at Tax Consulting SA

Lovemore Ndlovu

The South African Reserve Bank (SARB), in collaboration with various financial institutions, maintains a comprehensive record of the residency status of all South African banking customers. This practice is integral to their financial surveillance and regulatory compliance efforts, particularly considering South Africa’s greylisting status in February this year.

Misconceptions about non-resident account conversion

A crucial aspect to comprehend is that a change in tax residency status necessitates a corresponding update in your banking status, as required by SARB. When an individual ceases to be a tax resident in South Africa, their banking status must be adjusted, and their bank accounts converted to tax non-resident status. In the past, these accounts were converted to a ‘Blocked Capital Account’, which unfortunately led to confusion and the mistaken belief that the account would be entirely inaccessible.

Navigating the landscape of fund transfers

South African residents are granted the privilege to transfer up to R1m out of the country annually through their Single Discretionary Allowance (SDA), without the need for tax clearance from the South African Revenue Service (SARS). Transfers exceeding the R1m SDA limit will require an Approval International Transfer (AIT) Tax Compliance Status (TCS) PIN from SARS.

Conversely, non-residents are permitted to transfer up to R1m as a Non-Resident Travel Allowance (TA) in the same calendar year that they formally cease their tax residency. This allowance is a once-off dispensation and cannot be utilised in subsequent calendar years. It is crucial to differentiate between the TA and the SDA, as any remaining SDA balances cannot be utilised under the TA. Transfers exceeding the R1m TA limit will also necessitate an AIT TCS PIN from SARS.
Non-residents, beyond perhaps the once-off travel allowance, do not have access to the SDA, which means that all capital transfers out of South Africa, barring certain specific exceptions, require SARS approval. 

Notably, for transfers exceeding R10m, in addition to an AIT TCS PIN from SARS, approval from the Financial Surveillance Department of SARB is required before the funds can be transferred by the bank. Such transfers typically trigger a comprehensive Risk Management Test, which includes verifying tax status, assessing the source of funds, and evaluating the transaction’s risk in compliance with anti-money laundering and counter-terrorism financing requirements.  The complexities surrounding the cessation of tax residency in South Africa demand expert guidance. Failure to grasp the intricacies of exchange control requirements can lead to confusion and unintended consequences. The journey of emigration needs assistance from professionals who are well-versed in these intricacies. It’s a financial landscape that requires careful navigation, and expertise in both the requirements and practical realities.

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