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Liquid funds in SA – options for transfer abroad

By August 3, 2022October 3rd, 2023FinGlobal

Liquid funds in SA – options for transfer abroad

August 3, 2022

Even though exchange control legislation has been relaxed over the last year, it’s important to understand that red tape and administrative hurdles still remain when you transfer money from South Africa, irrespective of whether you are already living abroad or still contemplating your move. Being aware of the options available to transfer your liquid funds from South Africa will help avoid potential penalties, high transfer fees and unnecessary time delays.

Resident versus Non-resident

The importance of resident vs non-resident

The most important distinction when it comes to sending money from South Africa is whether you are seen as a resident or non-resident in the eyes of the South African Reserve Bank (SARB) and the South African Revenue Service (SARS). If you have completed a tax emigration or a financial emigration, you are classified as a non-resident and different rules apply to money transfers.

On the flipside, if you are still residing in South Africa or if you have not ceased residency, you will be classified as a resident or a resident temporarily abroad and again, a different set of rules apply.

Resident transfers

Residents over the age of 18, meaning citizens or permanent residents of South Africa, who have not emigrated with SARS or SARB, have two annual allowances available to transfer funds abroad:

  • Single Discretionary Allowance (SDA): Amounts up to R1 million are freely transferable, without the need for a tax clearance obtained from SARS.
  • Foreign Investment Allowance (FIA): Amounts between R1 and R10 million can be remitted via a foreign transfer allowance, provided that a Foreign Investment Tax Clearance Certificate is obtained from SARS prior to the transfer.

These limits reset every calendar year on the 1st of January. You can only transfer the funds through an Authorised Dealer. An Authorised Dealer is a bank or foreign exchange institution who have been authorised to deal in foreign currency by the South African Reserve Bank.

In the event that you have to transfer more than R10 million, a special application can be submitted to SARB and will be subject to a strict SARS risk management process. This assessment covers a tax status verification, source of funds investigation as well as a risk assessment in terms of the anti-money laundering and counter terror financing mandates as set by the Financial Intelligence Centre Act 38 of 2001.  It’s a mouthful, but it boils down to SARS wanting to make sure that no illegal activity was involved in generating the funds.

Non-resident transfers

As a non-resident, you can no longer use your Single Discretionary Allowance to transfer funds from South Africa. A distinction is instead made between transfers of an income nature and capital nature.

For instance, if you receive a regular pension income or you receive a monthly rental income from South Africa, these funds would be freely transferable, provided you keep your tax affairs in order and can provide an annual Good Standing Tax Clearance Certificate.

If you sold an investment or a property in South Africa, for example, this would be a capital transfer. All capital transfers require a Foreign Investment Tax Clearance Certificate obtained from SARS before the funds can be moved abroad. In the event that your Emigration Tax Clearance obtained when finalising your tax emigration is still valid, you can apply this towards your capital transfers, but only if you made mention of it on your initial SARS tax clearance application.

As a non-resident, you are also allowed to transfer funds in excess of R10 million, but the same stringent process described above will apply.

Foreign investment tax clearance – how does the application work?

Whether you are applying as a resident or non-resident, the purpose of a Foreign Investment Tax Compliance Status application is to ensure that you are tax compliant and that the funds leaving South Africa were obtained from legitimate sources. To this end, SARS requires the following information in order to investigate and ultimately approve the application.

  • Proof of Funds: The funds that will be transferred need to be immediately available i.e., it must be in your bank account.
  • Source of Funds:The source of funds that will be transferred needs to be disclosed, for example, inheritance, savings, pension, sale of property etc. Each source requires a set of specific supporting documents.
  • Statement of Assets and Liabilities: This statement must include all foreign and local interests held over the preceding three tax years.
  • Bank Account Statement: A bank account statement detailing the deposit of the funds must be provided.

Before lodging the application, ensure that the following is in place to avoid delayed turnaround times:

  • income tax number must be active
  • no outstanding debt or penalties on your account;
  • all returns must be up to date or in process of being assessed;
  • all registration details on the application must correspond with the information on the SARS system;

On average the turnaround time for issuance is 21 business days, provided that all documentation and information is correctly submitted. A Foreign Investment Tax Clearance is valid for a period of 12 months from the date of issue. Ensuring that this administrative hurdle is cleared gives you flexibility to transfer funds when exchange rates are favourable.

It’s clear that the easing of exchange control legislation still does not mean that we are free of the paperwork entirely. Not adhering to the rules set out by the SARB and SARS can have serious financial implications. Having a clear game plan for transferring liquid funds from South Africa means you can rest assured that you are compliant and most importantly, that you are able to utilise favourable transfer conditions when they arise, giving you the most bang for your buck.

FinGlobal is the trusted partner to thousands of South African expats who need assistance with transferring funds from South Africa. We offer competitive exchange rates, banking services, tax services, fixed fees and fast turnaround times – all wrapped into a convenient service under one roof.

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