In the dynamic landscape of foreign exchange, South African residents often find themselves seeking effective solutions for sending money abroad. In this article, we explore some of the more common ways that South African residents can send money abroad, one being the utilisation of Individual Annual Allowances, and the new approval process for international transfers (AITs) and another being Tax Emigration where we will highlight some of the key differences from its predecessor, Financial Emigration.
You will get to examine the trends in foreign exchange flows, showcasing how capital outflows from South Africa have increased in recent years, often driven by economic uncertainties and a desire for diversified investment portfolios.
Annual Individual Allowances
One of our frequently utilised services involves educating clients about, assisting in the application for, and monitoring their annual offshore allowances.
As resident South African taxpayers, individuals can externalise up to R11 million per calendar year. This includes a R1 million “Single Discretionary Allowance” (SDA) and an additional R10 million “Foreign Investment Allowance” (FIA) for direct offshore investments in foreign currency denominated assets. Exceeding the R1 million SDA may result in fines, making monitoring crucial. Currency Partners has invested in technology to help Partners keep track of their clients’ annual allowances.
Approvals for International Transfer
Resident South African taxpayers can transfer up to R1 million abroad using their SDA without requiring foreign tax clearance from SARS for additional transfers under their FIA within the same calendar year. However, individuals who have ceased tax residency in South Africa must obtain clearance for ALL funds transferred abroad.
To manage this in the past, SARS made provision for two types of TCS pins, namely an “Emigration” and a “Foreign Investment Allowance” (“FIA”) TCS pin. The former is required by persons transferring funds out of South Africa following the cessation of their South African tax residency, while the latter is required for Foreign Investment Allowance (FIA) transfers out of South Africa. To simplify the process, SARS consolidated the “Emigration” and “FIA” TCS pins into a single “Approval for International Transfer” (AIT).
Understanding Tax Emigration
Tax Emigration, formerly known as Financial Emigration, involves reporting oneself as a non-resident taxpayer to SARS, affirming tax residency in another country. One of the fundamental differences is that Financial Emigration was an application process run by an authorised dealer through the SARB and Tax Emigration is an application process through SARS.
Importantly, completing the tax emigration process does not affect one’s South African citizenship. It’s possible to retain a South African passport and return to the country at any time, with formal notification to SARS required for permanent return.
Currency Partners provides a comprehensive Tax Emigration service, from SARS “change in tax residency” applications to final tax returns and assistance with the withdrawal of retirement products or policy withdrawals along with the opening of non-resident bank accounts to expatriate funds.
Foreign Exchange Flow Trends
Formal Emigration (as captured via the SARB) has remained fairly flat over the period; however, it’s worth noting that 2022 showed the lowest flows of the period under consideration. Immigration inflows have, perhaps surprisingly, shown a small uptrend over the past few years.
Over the past eight years, the chart above reveals an increasing annual outflow of capital from South Africa, closely linked to a weakening rand. During times of uncertainty, investors are motivated to diversify their wealth and seek safer markets.
Partner with Us
At Currency Partners, we value lasting partnerships built on trust, dedicated service, and shared values. Our Partnership Team offers unique currency solutions integrated seamlessly into your business.
To learn more about the flow of money in and out of South Africa or to explore partnership opportunities with us, please register online here or contact us on [email protected].
We look forward to partnering with you and saving you time and money.
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