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SA Reserve Bank’s bold step on financial emigration is trickier than first thought


Lovemore Ndlovu is a SARS and Exchange Control Specialist at Tax Consulting SA.

South Africa’s financial emigration system changed just over a year ago. As of 1 March 2021, the South African Reserve Bank removed itself from the process in a move welcomed by the banks.

Financial emigration is the process used by many South Africans abroad to formalise their non-resident status for both tax and exchange control purposes

The move by the SA Reserve Bank (SARB) eliminated the need to complete the MP336(b) form which was required in conjunction with an emigration tax clearance certificate from the South African Revenue Service (SARS) to notify the SARB of one’s non-residence for exchange control purposes. However, banks were left to find ways to monitor and report to the SARB all remittances and transactions in and out of the “non-resident” bank accounts.

The SARB took the step just over a year ago without considering the consequences, with banks adopting individual approaches rather than following uniform protocols when adhering to the SARB’s exchange control compliances. The downside is that less “strict” banks are being preferred by expats due to lower levels of stringency.

Unfulfilled promised land

When announcing the new financial emigration process, the SARB confirmed that, for banking purposes, natural person non-residents and natural person residents would be treated identically.

The intention was that the locking of non-residents’ remaining assets in blocked capital accounts would fall away and all transfers from these accounts would be handled as normal fund transfers in line with any other foreign capital allowance transfers. But this did not materialise.

Upon realising that the distinction between South African resident assets and non-resident assets remained extant, most banks were forced to revert to the old system of “locking” non-residents’ funds in blocked capital accounts — this being the only feasible solution in controlling transactions in these non-resident accounts. 

SARB in the shadows

SARS was confirmed as the only player in the new financial emigration process. However, the SARB has not fully let go of the reins and remains an active participant behind the scenes, when one wishes to cease South African tax residency.

As it is a requirement that bank accounts be converted to non-resident status for one to be able to successfully externalise funds after ceasing tax residency, the SARB has the last word in finalising this closing step of the process.

Banks must still advise and seek approval from the SARB for non-residents with remaining assets over R10-million before converting the accounts to non-resident status and effectively externalising desired funds.

An unexpected final hurdle

To make matters worse, whether you are ceasing tax residency now or have previously done so under the old financial emigration regime, you will be required to obtain a tax compliance status (TCS) pin from SARS to remit funds.

Previously, the provision has been that individuals who formally emigrate would be allowed to transfer up to R10-million individually, or R20-million as a family unit without the requirement of a Tax Compliance Status (TCS) PIN. SARS now avails a Foreign Investment Allowance (FIA) TCS PIN beyond the validity of one’s emigration TCS PIN.

There is a long way to go before we see uniformity in the rules for exchange control under the new financial emigration regime. What is certain, however, is that taxpayers need to have a qualified adviser with experience from both tax and exchange control perspectives. BM/DM


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