By Jaymee Gobetz and Lilian Mongwe
Recent amendments from the Financial Surveillance Department of the South African Reserve Bank (SARB) introduce stricter rules for transferring income to non-residents and individuals who have ceased tax residency in South Africa.
These changes emphasise the growing link between exchange control and tax compliance, making it essential to provide the correct documentation before certain offshore transfers can be approved.
Historic Exchange Control Provision
Previously, income transfers were permitted for non-residents and individuals who had ceased South African tax residency, provided the authorised dealer obtained a Tax Compliance Status (TCS) – Good Standing certificate verifying that the taxpayer was fully compliant.
This confirmation was required annually to ensure ongoing tax compliance, creating a straightforward process that allowed authorised dealers to approve transfers once the certificate was in place.
What’s changed
The SARB amendments now require authorised dealers to obtain a Tax Compliance Status (TCS) – Approval for International Transfer (AIT) for certain transactions, replacing the previous Annual Good Standing certificate.
This change enforces increased tax compliance on a case-by-case basis and introduces additional documentation requirements for the following income transfers:
- Dividends distributed by a South African company;
- Trust distributions from testamentary and inter vivos trusts;
- Income accruing in the form of rental on fixed/moveable property and income from rental pool agreements; and
- Salaries and/or fees payable to bona fide non-residents and private individuals who ceased to be residents for tax purposes in South Africa.
On the contrary, non-residents and individuals who have ceased South African tax residency may now transfer pension and annuity payments offshore without the need to obtain a TCS – Good Standing certificate annually. Authorised dealers can process these transfers if the amounts are reflected, or will be reflected, on an IRP5 or IT3(a) tax certificate under specific tax codes (3602/3652, 3603/3653, 3610/3660, 3618/3668). Once this documentation is supplied, subsequent transfers may proceed without renewed confirmation, simplifying the process while maintaining regulatory oversight.
For non-residents who are not registered on SARS eFiling, a Manual Letter of Compliance – International Transfer (MLC) from the tax authorities is required before funds can be remitted abroad.
Our view
At Arro, we support the principle of harmonising exchange control with tax compliance. However, the practical implementation of the AIT process introduces significant challenges for non-residents and individuals who have ceased South African tax residency.
Unlike residents, who benefit from a R1 million annual single discretionary allowance, non-residents and those who have ceased South African tax residence must now obtain a TCS – AIT PIN for every listed income transfer, regardless of amount. This requirement imposes a disproportionate compliance burden, particularly for smaller transactions, and adds unnecessary administrative complexity and costs.
Ongoing processing delays at SARS and ambiguity regarding the scope of affected income streams further exacerbate these issues, highlighting the urgent need for clearer guidance and a more streamlined process.
While we welcome the simplified procedures for pensions and annuities, we caution that the increased administrative hurdles may undermine South Africa’s recent progress in strengthening its global investment reputation, especially following its removal from the FATF grey list. Non-residents should proactively review their compliance processes and plan remittances carefully to navigate these changes effectively.
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