4. Private Individuals Who Cease to be Residents for Tax Purposes in South Africa
4.1
The concept of emigration as recognised by the Financial Surveillance Department has now been phased out with effect from 2021-03-01.
4.2
The distinction between South African resident assets and non-resident assets remains extant.
4.3
Authorised Dealers may allow the transfer of assets abroad, provided a private individual:
(a) has ceased to be a resident for tax purposes in South Africa;
(b) has obtained a TCS in respect of “emigration” from SARS; and
(c) is tax compliant upon verification of the TCS.
4.4
In addition to (4.3) above, private individuals may in the same calendar year that they ceased to be residents transfer via an Authorised Dealer up to R1 million as a travel allowance, without the requirement to obtain a TCS PIN letter. This is a once-off dispensation and cannot be used in subsequent calendar years. Private individuals ceasing to be residents for tax purposes only qualify for the aforementioned travel allowance, and may not avail of any unutilised portion of the single discretionary allowance available to residents.
4.5
In addition, household and personal effects up to an amount of R1 million per family unit may be exported under a SARS Customs Declaration form within the same calendar year that the individual ceases to be a resident for tax purposes provided such assets have been declared on the relevant forms. Transactions of this nature will be treated similar to cash. For amounts in excess of R1 million, the provisions of (4.6) and (4.7) below will apply.
4.6
In addition to the transfers mentioned in (4.5) above, Authorised Dealers may allow the transfer of up to a total amount of R10 million per calendar year per private individual who ceases to be a resident for tax purposes in South Africa and is 18 years and older, provided that the individual is tax compliant and submits the applicable TCS Application for verification.
4.7
South African non-tax residents who transfer more than R10 million offshore are subject, initially to a more stringent verification process by SARS; as well as a subsequent approval process from the Financial Surveillance Department. Such transfers will trigger a risk management test that will, inter alia, include verification of the tax status and the source of funds, as well as risk assess the private individual in terms of the anti-money laundering and countering terror financing requirements, as prescribed in the Financial Intelligence Centre Act, 2001 (Act No. 38 of 2001).
4.8
With regard to (4.7) above, it is imperative that the application to the Financial Surveillance Department is accompanied by, inter alia, a TCS PIN letter that will contain the tax number and TCS PIN to verify the taxpayer’s tax compliance status and amount requested to be transferred.
4.9
Any requests for further transfers of remaining assets will be subject to a TCS application in respect of Foreign Investment Allowance (FIA) irrespective of the date of emigration, i.e. prior or after 2021-03-01.
4.10
The externalisation of listed and unlisted domestic securities by individuals who cease to be residents for tax purposes will be treated similar to cash, which will form part of the foreign capital allowance and is also subject to the TCS process at SARS.
4.11
In respect of the withdrawal of retirement funds (lump sum benefits from pension preservation, provident preservation and retirement annuity funds) when South African residents cease to be residents for tax purposes in South Africa, payment of lump sum benefits to such individuals shall only be allowed by Authorised Dealers if the individual member has remained non-tax resident for at least three consecutive years. The requirements stated in (4.6) and (4.7) above will apply.
4.12
All assets that were previously blocked as per a specific directive that was given by the Financial Surveillance Department in terms of the provisions of Exchange Control Regulation 4(2), may be dealt with as follows:
(a) In respect of income and capital distributions from inter vivos trusts, such distributions may be transferred abroad, subject to the TCS process being completed by the private individual and/or beneficiaries of the trust. For any transfers above R10 million, the requirements of (4.7) above will apply.
(b) With regard to pre-inheritance gifts, such funds may be transferred abroad, subject to the TCS process being completed by the resident donor. For any transfers above R10 million, the requirements of (4.7) above will apply.
4.13
Applications by private individuals who cease to be residents for tax purposes and who are no longer active on the SARS registered database and receive an inheritance or life insurance policy (excluding lump sum benefits from pension preservation, provident preservation, retirement annuity funds and annuities from insurers) up to R10 million, will not be required to apply to SARS for a Manual Letter of Compliance – Transfer of funds. For applications above R10 million, applicants are required to obtain a Manual Letter of Compliance – Transfer of funds, from SARS.
4.14
On a once-off basis, the remaining cash balances not exceeding R100 000 in total of private individuals who have ceased to be residents for tax purposes, may be remitted offshore without reference to the SARS.
4.15
With regard to the gathering of statistical information on the assets and liabilities declared by South African residents who cease to be residents for tax purposes, the Financial Surveillance Department will rely on information collected by SARS via the SARS TCR01 form.
4.16
In terms of the TCS system, a TCS PIN letter will be issued to the South African residents who cease to be residents for tax purposes that will contain the tax number. Authorised Dealers must use the TCS PIN to verify the applicant’s tax compliance status via SARS eFiling prior to effecting any transfers. Authorised Dealers must ensure that the amount to be transferred does not exceed the amount approved by SARS. Authorised Dealers should note that the TCS PIN can expire and should the Authorised Dealers find that the TCS PIN has indeed expired, the Authorised Dealers must request that the taxpayer must submit a new TCS application to SARS to be issued with a TCS PIN.
4.17
Income due to private individuals who ceased to be residents for tax purposes in South Africa may be transferred offshore, provided the Authorised Dealers ensure that the amounts to be transferred are legitimately due to private individuals who ceased to be residents for tax purposes in South Africa, ensure that suitable arrangements are made to meet all local liabilities and verify a TCS of good standing at least once a year to confirm that the private individual who ceased to be resident for tax purposes in South Africa is tax compliant in respect of the transfer of income referred below. With regard to (g) and (h) below, a TCS of good standing is required at least once a year on applications up to R10 million and a tax compliance status request – TCS FIA is required for above R10 million applications.
(a) interest and profit;
(b) dividends: Authorised Dealers may allow the transfer of dividends, profit and/or income distributions from quoted companies, non-quoted companies and other entities in proportion of percentage shareholding and/or ownership. Authorised Dealers may not allow the transfer from South Africa of any income earned outside South Africa, unless such funds represent the profits of wholly-owned subsidiaries or of branches of South African registered companies previously transferred to South Africa;
(c) income distributions from close corporations;
(d) directors’ fees or members’ fees;
(e) pension payments paid by registered funds only;
(f) cash bonuses on insurance policies;
(g) income received from a trust created in terms of a last will and testament;
(h) income received from an inter vivos trust;
(i) rentals on fixed property including rental pool agreements, provided that rentals are substantiated by the production of a copy of the rental or rental pool agreement;
(j) annuity payments;
(k) refunds paid by SARS, provided that Authorised Dealers are satisfied that the beneficiaries are permanently resident outside the CMA; and
(l) salaries and/or fees payable in respect of services rendered.