10. Income Transfers to Non-Residents and Private Individuals who Cease to be Residents for Tax Purposes in South Africa
10.1 Dividends, profits and current income due to non-residents
Income may be transferred offshore provided that:
(a) the transfer of dividends, profit and/or income distributions from quoted, non-quoted companies and other entities is in proportion of percentage shareholding and/or ownership; and the transfer from South Africa of any income earned outside South Africa represents the profits of wholly-owned subsidiaries or of branches of South African registered companies, previously transferred to South Africa.
10.2 Interest
(a) The transfer of market related interest income on local debt securities owned, including interest bearing deposits held, with local financial institutions, may in terms of the provisions of the Authorised Dealer Manual, or in terms of a specific authority granted by the Financial Surveillance Department, be permitted, provided that documentary evidence of such indebtedness by a resident debtor is produced.
(b) Interest income on loans granted to residents is transferable provided that the Authorised Dealer is satisfied that both the acceptance of the loan and the interest rate payable were approved by an Authorised Dealer or the Financial Surveillance Department.
(c) Interest income in respect of funds held in trust accounts may be transferred via an Authorised Dealer against the production of documentary evidence confirming the amount involved.
10.3 Directors’ fees
The transfer of directors’ fees is permissible provided that:
(a) the application to the Authorised Dealer is accompanied by a copy of the resolution of the board of directors of the remitting company confirming the amount to be paid to the beneficiary; and
(b) it can be shown that the beneficiary is a non-resident or private individual who ceased to be a resident for tax purposes in South Africa.
10.4 Income from trusts
The transfer of income from trusts created in terms of a Last Will and Testament and inter vivos trusts is permitted via an Authorised Dealer.
10.5 Rentals
Income accruing to non-residents in the form of rental on their local fixed property and income from rental pool agreements in which they have an interest may be transferred abroad against the production of a copy of the rental or rental pool agreement, provided that the client confirms to the Authorised Dealer that the amount is reasonable in relation to the property in question.
10.6 Members’ fees
The transfer of members’ fees to members of close corporations is permitted, provided that:
(a) the application to the Authorised Dealer is accompanied by a copy of the resolution of members of the remitting close corporation confirming the amount to be paid to the beneficiary; and
(b) it can be shown that the beneficiary is a non-resident or private individual who ceased to be a resident for tax purposes in South Africa.
10.7 Royalties and fees payable by South African business entities
All royalties and fees payable to unrelated non-resident parties are freely transferable abroad as outlined below:
(a) payment for services rendered by non-residents, including the reimbursement of airfares, accommodation and other costs directly associated with the rendering of the services in question are transferable;
(b) prior to effecting payment, business entities must furnish an Authorised Dealer with a copy of the agreement entered into where available, but in all instances an invoice verifying the purpose and the amount involved from the relevant non-resident party must be presented;
(c) where applicable, minimum payments, advance payments and down payments are permissible provided that the advance payments and down payments are recoupable from future royalties or fees payable;
(d) payment of percentage based fees are permissible provided that the client confirms it is normal in the trade concerned;
(e) the applicant entity must present a letter in respect of royalty payments, on an annual basis, from an independent auditor, confirming the amount or percentage transferred over a 12-month period to the Authorised Dealer. This arrangement only applies where the applicant entity has made recurring payments in terms of a royalty agreement; and business entities wishing to make royalty and fee payments to related parties abroad should submit a suitable application to the Financial Surveillance Department via an Authorised Dealer.
10.8 Licence agreements involving the local manufacture of goods
Royalties and fees payable to non-residents (related and unrelated parties) in respect of licence agreements involving the local manufacture of goods are permitted subject to the following set criteria:
(a) in respect of any new, renewed or amended licence agreement involving the local manufacture of goods, licensees must submit the royalty agreement in triplicate, supported by a statement furnishing the information called for in the questionnaire Form DTP 001 directly to the Technology Transfer (Royalties) Unit, Directorate of the Enterprise Organisation, Department of Trade and Industry, Private Bag X86, Pretoria, 0001 and not to the Financial Surveillance Department; the payments to be made must fall within the terms of the relative agreement and, where applicable, comply with any conditions laid down in the authority granted by the Department of Trade and Industry;
(b) where applicable, minimum payments, advance payments and down payments are permissible provided that the client confirms that such payments are normal in the trade concerned and the advance payments and down payments are recoupable from future royalties or fees payable;
(c) prior to any payments being effected, the licensee must present to an Authorised Dealer a copy of the approval letter granted by the Department of Trade and Industry together with an invoice from the licensor, verifying the purpose and the amount involved from the relevant non-resident party; and
(d) for recurring payments, a letter from the independent auditors of the local applicant entity, confirming the amount or percentage transferred or to be transferred has been correctly calculated and is reasonable in the trade concerned, must be submitted to the Authorised Dealer effecting the transfer at least once per calendar year.