What you need to know about the new rules on offshore distributions from South African trusts

For South Africans living overseas, accessing funds from a trust in South Africa has always been complicated. Strict exchange control rules and approvals made moving money offshore a challenge, leaving many expats wondering how to manage their South African inheritance or distributions back home. Now, SARS has opened the door for offshore trust distributions, giving non-resident beneficiaries a clear path to receive their funds while staying fully compliant with South African tax laws.

In this guide, we’ll break down what’s changed with trusts and distributions to beneficiaries, and how to make the most of these new cross-border transaction opportunities.

Trust funds in South Africa – why the changes matter

For many years, trusts – particularly family trusts in South Africa – could only distribute funds to beneficiaries locally. Sending money abroad? That required exchange control approval from the Reserve Bank, which was hard to get, and in most cases, the answer was simply “no.”

Now, with updated guidance from SARS, there’s a new pathway for cross-border transactions in South Africa. This is big news if you’re looking to diversify assets, make capital distributions from trusts, protect wealth in different currencies, or build a financial safety net outside South Africa.

The big shift: how trusts in South Africa work now

So what’s changed, and why is it such a big deal? Before, the South African Reserve Bank (SARB) had the final say on whether a South African trust could distribute money offshore, and more often than not, the answer was “no.” This meant that many families with wealth tied up in trusts found it nearly impossible to move their money abroad legally.

Now, it’s SARS that holds the power. Instead of SARB shutting the door, trusts may now make use of the SARS Approval of International Transfers process, if the trust is 100% tax compliant. In other words, if your trust has its tax affairs in order, SARS will now consider applications to move funds offshore.

This change is more than just a new rubber stamp. It represents a shift in how South Africa approaches cross-border trust distributions. By handing oversight to SARS, the government is acknowledging that South Africans living abroad need more flexibility to transfer wealth internationally, while maintaining a compliant and transparent system. For trustees and expat beneficiaries, this opens new doors. Instead of being stuck with local restrictions, there is now a clear, closely regulated pathway to move trust distributions offshore legally.

Read more:

• Is your South African trust compliant with SARS? Here is what you need to know.
• Protecting your assets and beneficiaries with a trust in South Africa: advice for expats.

Getting approval for a cross-border trust distribution: the two-step process

So, how do you get money from a South African trust to an offshore trust or non-resident beneficiary? It’s not an automatic transfer; you’ll need to go through a two-step approval process to make sure everything is above board.

Step 1: SARS approval

First, the trustees must apply to SARS for a tax clearance. This involves submitting supporting documents, such as:

• The South African trust deed
• A Letter of Authority from the Master of the High Court
• Trustee resolutions authorising the distribution
• Relevant bank statements and financial records

SARS then runs through a checklist to confirm:

• Is the receiving party correctly listed as a beneficiary?
  Does the trust deed allow this kind of cross-border distribution?
• Is the South African trust fully compliant with capital gains tax and any other outstanding tax obligations?

If everything checks out, SARS issues a compliance letter, which effectively green lights the transfer process.

Step 2: SARB Approval

Once SARS has signed off, the trustees must submit the compliance letter to the Reserve Bank, via a South African bank, to apply for approval.

The bank will then:

• Review the SARS approval and supporting documents
• Ensure the transfer aligns with South Africa’s exchange control regulations
• Facilitate the actual cross-border payment to the offshore trust or non-resident beneficiary

Only after both SARS and the SARB their approval can the funds be legally moved have given the go-ahead can the funds be legally moved offshore.

Distributions to non-resident beneficiaries – the tax twist

It’s not only offshore trusts that matter — sometimes distributions go directly to beneficiaries who live abroad. That’s where things get a little more complex when it comes to the taxation of trusts in South Africa.

Read more: Foreign trust beneficiaries – the truth about trust taxation in South Africa.

Here’s how trust taxation in South Africa works:

• For South African tax residents: If the beneficiary lives in South Africa, any income or capital distributed by the trust is taxed as part of their annual return, just like regular income.
• For non-resident beneficiaries: If the beneficiary lives outside South Africa, the trust is required to pay 45% tax on the distribution before the funds leave the country.

The exact rate can change if South Africa has a double taxation agreement (DTA) with the country where the beneficiary resides. DTAs can reduce the withholding tax, helping avoid the same income being taxed twice.

A quick refresher: how trusts are taxed in South Africa

• Trusts pay a flat 45% trust tax rate on income they keep
• If income is “vested” in beneficiaries, those beneficiaries pay the tax instead
• South African beneficiaries must declare it in their annual returns
• Non-resident beneficiaries face the 20% withholding tax, if the nature of the distribution is dividends from investments in companies that the trust holds.
• Trustees must also keep up with annual returns, IT3(t) forms, and reporting obligations.

Read more: Non-resident beneficiary trust distributions – South African tax implications you should know.

Things trustees should keep in mind with cross-border transactions

• No in-specie transfers: Property or shares cannot be moved offshore directly, only cash.
• Capital gains tax for trusts in South Africa: CGT applies to assets sold before distributing cash.
• Double taxation risks: Non-residents may face tax in both countries, unless a DTA applies.
• Compliance is king: Miss a withholding tax or reporting deadline, and penalties are sure to follow.

FinGlobal: making cross-border trust distributions simple

Need to transfer money from a South African trust to a beneficiary overseas? You don’t have to figure it out on your own. At FinGlobal, we specialise in handling the entire process of cross-border trust distributions, making sure everything is done correctly, securely, and without unnecessary stress.

From SARS tax clearance to SARB exchange control approval and the foreign exchange transfer itself, we take care of every step for you. You’ll always know where things stand because you can track our progress online or on the FinGlobal app, which gives you total visibility and peace of mind. Our experts understand the regulations, know how to breeze through the paperwork, and will keep you updated from start to finish – all with no upfront costs.

With FinGlobal by your side, you can trust that funds will reach the right people, in the right way, and in full compliance with South African tax and exchange control rules.

To get started, leave your contact details below, and let’s make your next trust distribution simple, stress-free, and fully compliant.