Expats should not have to wait unduly long for their SA funds to be transferred offshore
An elderly South African expatriate who has been living in Spain for close to a decade, faced one hurdle after the other over the past two years while trying to transfer his annuity funds from South Africa – which he needed for living expenses – into his overseas account.
Although strict exchange control regulations apply, and full tax compliance at the South African Revenue Service (SARS) is a prerequisite for South African expatriates who want to transfer their money abroad, there is no need for such a long delay, says Cherylene Hogan, Key Accounts Manager at Africorp Treasury, a licensed financial intermediary service provider specialising in foreign banking solutions and cross-border payments.
With a thorough understanding of the requirements from both SARS and the South African Reserve Bank (SARB), and by managing all the communication and necessary documentation for approval, the man’s funds were successfully transferred within three months after Africorp Treasury took over the matter.
The South African bank where the gentleman had his funds held, placed it on hold, and the requirement for the release of these finds was that he had to obtain a SARS Non-Resident Tax Status Confirmation Letter confirming he has ceased tax residency. Due to South Africa’s exchange control measures, without this letter the man was unable to obtain the necessary Approval of International Transfer (AIT) to move his money.
Apart from this hiccup, he had to rely on call centres and ended up dealing with different consultants during the time he was trying to resolve the matter from afar.
Hogan and her team assisted him in obtaining his SARS Non-Resident Confirmation Letter, to remotely open a non-resident bank account in South Africa where the annuity funds were paid into, obtained the AIT and then transferred the funds offshore.
Sooner or later most South African expatriates will find they need to transfer significant amounts of money abroad, whether it be Retirement Annuity encashments, proceeds from selling their South African home or shares, a dividend pay-out, or savings.
While your money is yours to manage, and easy access to your funds is essential, ensuring tax compliance and adhering to exchange control regulations are crucial for South African expatriates when remitting money across borders. Obtaining an AIT Tax Compliance Status (“TCS”) PIN from SARS is the key in transferring money abroad.
Who needs an AIT?
- South African tax residents will need an AIT for transfers of between R1 million and R10 million per year. Transfers of up to R1 million per calendar year is allowed under the Single Discretionary Allowance (SDA) for tax residents and no AIT is required for that.
- Expatriates who broke ties with SARS by formally ceasing tax residency, cannot make use of the SDA. As such South African non-resident taxpayers must have an AIT for any amount, from the first Rand, they want to transfer out. Such an AIT is valid for 12 months at a time.
The R10 million question
For transfer of amounts above R10 million both tax residents and non-resident taxpayers will need additional approval from the SARB’s Financial Surveillance Department.
Always tax compliance first
The AIT process provides SARS with the opportunity to scrutinize the individual’s income and tax affairs to ensure full tax compliance. The process consolidates the previous requirements of an Emigration TCS Pin and Foreign Investment Allowance TCS Pin.
Before individuals can transfer money offshore, their tax affairs in South Africa must be in order, meaning they have declared all income to SARS and have no outstanding returns or tax debt.
Expert intermediaries who assist expats with sending money abroad, will recommend a Tax Diagnostic as a first check that you are in the clear at SARS.
Ensure your paperwork is in order
Having the required documents ready outlining the source of the funds to be transferred, be that bank statements, proof of sale of a property or correspondence from the pension fund administrator, is very important.
South Africans who have ceased tax residency, must also produce the SARS Non-Resident Tax Status Confirmation Letter acknowledging this status and tax compliance. Choose professionals who know what SARS is looking for in order to timeously secure an AIT.
SARS’ turnaround time for an AIT application is 21 business days, where no additional information or verification is required, but with straightforward applications this may be significant less, says Hogan. It is advisable to start the process as soon as you are ready to transfer funds to avoid delays.
When transferring funds from multiple sources of income at once, it can be more complex and is best handled by professionals.
When to expect your funds from SA
Money from the South African source will be paid into a South African bank account and once the bank has received the AIT, the transfer can proceed.
Individuals who have closed their SA accounts, may need to open a new bank account in South Africa for this purpose. Africorp Treasury engages with Investec Bank and will assist in remotely opening an account within 24 hours. A trusted intermediary will ensure the funds are reported correctly, keep the recipient informed about progress and transfer the funds at competitive forex conversion rates.
Expats who already have a non-resident bank account may need assistance in obtaining an AIT without delay to proceed with the overseas transfer.
Note that the funds will only be paid into the overseas bank account in the applicant’s name and not into any third party-account.
Conclusion
Transferring large sums of one’s money is stressful for most at the best of times. South Africans who started a new life abroad may be even more nervous about how their entire life savings will reach their overseas bank account smoothly, securely and swiftly. Professional assistance from specialists in this field will make this possible.