If you’re planning to move money out of South Africa once you’ve left, it’s important to ensure you’re well informed on the exchange control allowances. These are the rules and procedures that govern the amount of money you’re permitted to transfer abroad, and the paperwork you’ll need to complete and submit to ensure your money moves are compliant with the South African Revenue Service (SARS) and they’re not going to raise any red flags. South African tax residents have two exchange control allowances available to them – the Single Discretionary Allowance, and the Foreign Investment Allowance (also known as the foreign capital allowance).
Here’s what you need to know about making use of the Foreign Investment Allowance for individuals, including what supporting documentation you’ll need to submit along with your foreign investment allowance application form.
How much money can you move out of South Africa?
The Single Discretionary Allowance permits R1 million to be transferred offshore, without the requirement to obtain a tax clearance certificate from SARS.
The Foreign Investment Allowance for individuals gives you the means of moving up to R10 million out of South Africa. If you want to move more than R10 million out of South Africa, given the size of the amount, there are a fair number of hoops to jump through first.
- Moving in excess of R10 million offshore will trigger a verification process that starts with SARS and ends with approval from the Financial Surveillance Department of the South African Reserve Bank (SARB).
- SARS will conduct a risk management test that looks closely at your tax status, the legitimacy of source of your funds, and examines whether you are a risk in terms of money laundering or financing terrorist operations, as is the legal requirements.
- When your application goes to the SARB, it must be accompanied by a TCS PIN letter from SARS indicating the Rand amount that may be moved out of South Africa.
You will apply for this TCS PIN via eFiling, and you will upload the necessary supporting documentation for SARS to review
The supporting documentation to use the Foreign Investment Allowance usually includes:
- Verification of the source of funds that you wish to transfer overseas.
- A Statement of Assets and Liabilities that shows your previous three tax periods.
- A Power of Attorney if the TCS application is being submitted by someone on your behalf.
Further documents required for TCS in respect of foreign investment allowance for individuals depends on where your money comes from
The purpose of a Foreign Investment TCS application is to ascertain that the funds leaving South Africa were legally and legitimately obtained (i.e: not as a result of crime, fraud, terrorism or corruption) and that you are square with the tax authority. To this end, SARS asks for the following context to assist them in their investigation of your application.
- Proof of funds: the money must be physically present and available in your bank account. They cannot be held in an investment pending approval for your transfer.
- Origin of funds: your source of funds must be clearly disclosed and traceable. SARS needs a list of documents in this respect, based on the type of asset you want to liquidate and transfer. See this list of supporting documents required for foreign investment allowance here.
- Statement of Assets and Liabilities: You need to provide a statement of South African assets and liabilities for the three preceding tax years. This is to ensure that SARS hasn’t missed a disposal or acquisition of any asset that could trigger a capital gains tax liability.
Once SARS is satisfied that the source of your funds is no cause for concern, they will issue a TCS FIA PIN. This is valid for 12 months.
Further reading on using the foreign investment allowance to move money offshore:
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