Keeping your South African bank accounts and financial connections post-emigration

Suppose you’re planning your emigration from South Africa. In that case, knowing there’s more to leaving than just packing your possessions, finding accommodation and rounding up your family for an international flight is essential. You’ve also got to think about moving your finances from one country to another and the tax implications of your emigration. But before you start to panic about this, take a deep breath. Let’s consider what to do when emigrating from South Africa and what you need to know.

What happens to your bank accounts when you emigrate from South Africa?

A common misconception among South Africans planning to emigrate is the need to close their local bank accounts. Maintaining a South African bank account is essential for migrating your finances. Once you’ve made your emigration official with SARS and obtained tax clearance, your South African bank account will be reclassified as a Non-Tax-Resident (NTR) account. This change in status is essential to ensure compliance with South African tax laws and to facilitate the smooth transfer of funds.

What changes when you emigrate?

• Account number: Your account number will remain unchanged.
• Access and transactions: You can continue to manage your account through online banking and mobile banking apps for domestic transactions.
• International transfers: Your bank can assist with transferring funds from South Africa to your new country of residence, mainly when dealing with the proceeds from the sale of assets like property or investments.
• Retirement fund withdrawals: An NTR account is essential for withdrawing retirement fund lump sums. You must maintain non-resident status for at least three consecutive years to qualify for these withdrawals.

Understanding bank account conversions post-emigration

When you cease to be a tax resident of South Africa, your bank accounts must be converted to a non-resident status to align with your new tax status. Previously, these accounts were known as “Blocked Capital Accounts” or “Blocked Bank Accounts”, which led to misunderstandings about account accessibility. This term was used under the old South African Reserve Bank (SARB) regulations for South African non-residents who emigrated.

However, as of March 1, 2021, a new system has been implemented. The focus now lies on the cessation of tax residency with the South African Revenue Service (SARS). Under this new system, bank accounts are converted to non-tax resident accounts. The SARB no longer plays an active role in this process.

It’s important to note that this conversion doesn’t mean your account is blocked. You will still have access to your funds, subject to certain conditions and limitations.

What you need to know about non-tax resident bank account compliance

Non-resident account holders must inform their bank about their tax residency status changes. This ensures that transactions are correctly classified, transfer approvals are processed accurately, and monthly reports to the South African Reserve Bank (SARB) are compliant.

Failure to notify your bank can lead to severe consequences:

• Account freezing: Your bank may freeze your account, preventing you from accessing funds.
• Spend block: Your bank may impose a “spend block,” restricting your ability to make transactions.
• SARB intervention: In cases where funds have been transferred abroad using a non-compliant account, the SARB may require these funds to be returned to South Africa before being transferred again.

To avoid these potential issues, it is vital to inform your bank about your change in tax residency status and ensure that your account is correctly converted to a non-tax resident account.

What you need to know about funding and maintaining non-tax resident bank accounts

Non-tax resident bank accounts typically cannot be funded by resident sources. This means gifts, cash deposits, or EFTs from South African residents are generally prohibited. Permissible funding sources include capital assets, such as funds derived from the sale of declared South African assets and funds transferred from foreign sources.

It is essential to remember that your bank will require documentation to verify the source of funds before crediting them to the account. While small amounts of local Rand funds, such as refunds or inheritance, may be allowed, they still require proof of origin.

Credit facilities for non-tax resident bank accounts

As a non-tax resident bank account holder, you will typically not be eligible for credit facilities such as credit cards and overdrafts. Prior approval from the South African Reserve Bank (SARB) will be required for more extensive credit facilities like personal or home loans. In the case of home loans, a specific 1:1 ratio applies. As a non-resident, you can only borrow an amount equal to the value of your cash or assets held locally.

Read more: Important things to know about buying property in South Africa as a non-resident.

South African exchange control rules for non-residents – receiving proceeds from local assets

You’ll need a local non-resident bank account in your name to receive proceeds from your remaining local assets. This is especially important for assets like insurance and retirement annuity policies, which cannot be paid directly into third-party accounts.

Proceeds from sources like inheritance or distributions from trusts may be transferred directly abroad from the estate or trust account. However, it’s important to note that the estate or trust will ensure compliance with all relevant regulations.

Offshore transfers for non-resident South Africans

When transferring funds abroad, non-resident South Africans must adhere to specific tax clearance requirements:

• Capital funds: To transfer capital funds, you’ll need an Approval International Transfer (AIT) Tax Compliance Status (TCS) PIN from the South African Revenue Service (SARS). This PIN serves as approval for the transfer.
• Income funds: A Good Standing TCS PIN is required to verify tax compliance before the transfer can be authorised.

It is essential to clarify that non-resident South Africans cannot access the R1 million Single Discretionary Allowance (SDA) available to tax residents. This means there is no annual limit on the funds that can be transferred abroad.

Read more: Clarifying resident vs. non-resident tax status for South African expats.

Stringent checks on large transfers from non-resident bank accounts

For transfers exceeding R10 million, in addition to the AIT TCS PIN from SARS, approval from the South African Reserve Bank’s Financial Surveillance Department is required. Such large transfers typically trigger a risk assessment to verify your tax status the source of funds, and to comply with anti-money laundering and counter-terrorism financing regulations.

Read more:

• Emigrating from SA? What must be part of your Financial Emigration Plan™?
• What happens if you leave South Africa with unpaid debt?
• Opening a South African bank account after tax emigrating: What you need to know

FinGlobal: cross-border financial specialists for South Africans abroad

Managing your financial transition from one country to another can be stressful. FinGlobal is here to handle the headache on your behalf. Our team of tax specialists, international financial planners and exchange control advisors is ready to streamline the migration of your finances from start to finish. We can assist you with everything from tax emigration to tax clearance, retirement annuity withdrawal and international money transfers.

Interested in learning more about our banking facilities for non-residents? Do you have questions about our tax services for expats? Leave your contact details below, and we’ll be in touch!