What Documents Do I Need to Apply for A Foreign Investment Tax Clearance Certificate From SARS?

If you’re a South African resident or you’re living temporarily abroad, there’s an offshore allowance limit as to how much money you can move out of the country every year and there are two ways of doing it. First, is the Single Discretionary Allowance which allows you to move up to R1 million offshore for any legal purpose, including investment. This allowance can currently be used without tax clearance. The second avenue is the Foreign Investment Allowance, in terms of which you can move up to R10 million offshore per calendar year with prior tax clearance from the South African Revenue Service (SARS).

If you’re planning on utilising the Foreign Investment Allowance for the first time to move money abroad or invest offshore, (and you have not undertaken financial emigration) let’s take a look at what SARS tax clearance entails. 

 

What can you do with your foreign investment allowance?

Well, judging by the name of the allowance, it makes sense that you can invest your money offshore. You can shift this money into offshore investment portfolios, property, bank accounts or other investments.

 

What supporting documentation is necessary when applying for tax clearance to use the Foreign Investment Allowance?

In order to utilise this means of shifting money offshore, you need a tax clearance certificate from SARS. Today, this is known as obtaining your Tax Compliance Status (TCS).

 

To apply for tax clearance, you will need to submit the following documentation to SARS:

1. Verification of the source of capital that you plan to invest offshore (see details below).
2. A statement of your assets and liabilities for the previous three tax years (in which you must disclose all your investments, loan accounts and distributions from local and foreign companies, trusts and so forth.
3. Any applicable Power of Attorney declaration if the TCS application is being made on your behalf.

 

What supporting documents do you need to show the source of your capital that is to be invested or moved offshore?

SARS wants to know where your money is coming from, so you are required to submit the following supporting documents in relation to the source of your capital.

 

Loan:

• Where a parent lends money to the child to invest offshore you must show:
  • The loan agreement; and
  • Bank statements of that parent, not older than 3 months.
• Where a trust lends money to a trustee or beneficiary to invest offshore:
  • The loan agreement;
  • Bank statements of the trustee or beneficiary, not older than 3 months;
  • The latest Trust Financials;
    • Three months bank statements of trust, not older than 3 months; or
    • The trust’s latest share portfolio statement (not older than 3 months) which must include the amount of shares and current market value.
• Where a company lends money to a director of the company to invest offshore:
  • The loan agreement between the company and the director;
  • Bank statements of the director, not older than 3 months; and
  • The company’s latest annual financial statements.

 

Donation:

• If the donation is between spouses:
  • A declaration (IT144); and
  • Bank statement of donee, not older than 3 months
• If the donation is not between spouses:
  • A declaration (IT144)
  • Proof (Copy of the receipt) of donations’ tax paid; and
  • Bank statement of donor and donee, not older than 3 months.

 

Inheritance:

• Letter from the executor of the estate;
• A copy of the Liquidation & Distribution account; and
• Bank statement, not older than 3 months.

 

Savings / Cash / Bank Account / Fixed Deposits:

• Bank statement, not older than 3 months; and
• Proof of source (i.e. where and how you obtained the money).

 

Shares:

• Portfolio statement not older than 3 months, including the amount of shares and current market value.

 

Sale of property:

• Original letter from the conveyancer to confirm the property transfer and verify that the money will be transferred from the trust account; or
• Proof of receipt of the proceeds of sale together with applicant’s bank statement not older than 3 months.

 

Royalty Income:

• Source of royalty income; and
• Proof of royalty payment.

 

Earnings:

• Where there is recurring foreign investments not exceeding R30 000 per annum, a copy of a salary slip is required once a year;
• The policy number; and
• It must be noted that the financial institution (e.g. Sanlam / Old Mutual) will apply on behalf of the taxpayer.

 

Distributions from a trust:

• Resolutions from the Trust instructing the distributions;
• Details of the source from the Trust making the distribution;
• Bank statement of Trust, not older than 3 months; or
• Trust’s latest share portfolio statement (not older than 3 months); including the amount of shares and current market value.

 

Other:

• Documentary proof and explanation.

 

[Source: SARS]

• Read more about the step-by-step Tax Compliance Status process here.
• Read more about how to invest money offshore from South Africa.

 

FinGlobal: cross-border financial services specialists

Need assistance with tax clearance and utilising your Foreign Investment Allowance? FinGlobal is ready to help!  We offer free consultations and we will handle all the SARS and SARB processes to ensure safe, compliant and secure foreign currency transactions. Our dedicated financial planning experts and a strong partnership with Bidvest Financial Services means that we can promise you highly-competitive exchange rates, low fees, streamlined processes with unrivalled personal service – and we can keep that promise!

To find out more about our forex services, leave us your details and we’ll be in touch. Contact FinGlobal today!