On 1 March 2021 new rules came into effect where the process of financial emigration through the South African Reserve Bank (SARB) was replaced by a new verification process primarily administered by the South African Revenue Service (SARS).
Under the new dispensation natural person emigrants and natural person residents are treated the same. This is not to say that emigrants can now freely transfer funds offshore. The process of controlling or blocking an emigrant’s remaining assets in a special blocked account has fallen away. Authorised Dealers (e.g., banks) may, subject to tax compliance, allow the transfer of assets abroad. Transfers of up to R1 million per individual per calendar year may be transferred without a Tax Compliance Status (TCS) from SARS. A TCS is however required when an emigrant transfers amounts of between R1 million and R10 million offshore per calendar year.
Emigrants who transfer more than R10 million offshore are initially subject to a more stringent verification process by SARS and approval process by SARB. Such a transfer triggers a risk management test that includes verification of tax status and source of funds, along with a risk assessment in terms of the anti-money laundering and countering terror financing requirements prescribed by the Financial Intelligence Centre Act.
A person applying for a TCS will need to be older than 18 years of age. The previous form used by SARB (Form MP 336(b)) does not have to be submitted to SARS as part of the TCS application. An emigrant will now be required to complete the SARS TCR01 form disclosing assets and liabilities.
With regard to emigrants who want to access their retirement fund benefits, they will first need to prove that they have been non-resident for tax purposes for an uninterrupted period of three years and that an applicable Tax Directive was issued to the retirement fund by SARS. Proof of non-residency may include proof of being a tax resident in another jurisdiction.
Although it is not a new rule, emigrants should be aware of the deemed disposal provisions in section 9H of the Income Tax Act, where a person is treated as having disposed of his assets at market value when he ceases to be a South African tax resident. The effect of this is that certain “departure taxes” may become payable by triggering a receipt or accrual of a capital or a revenue nature.