Emigrating? You will have to check in with Sarb to move your money

South African citizens looking to relinquish their residency in South Africa, will have to still get approval from the South African Reserve bank (Sarb), especially when it comes to moving funds of about R10 million out of the country during or after emigration.

Head of Sarb Engagement and Expatriate Compliance at Financial Emigration at Tax Consulting South Africa, Lovemore Ndlovu, explained: “Currently, we’re not only seeing people leave the country for better prospects abroad but also a rise in those moving funds over R10 million offshore”.

Ndlovu confirmed that such high amounts required Sarb approval. Ndlovu did warn, however, that it is a long and complex process that needs a solid roadmap to succeed and the support of a strong legal function.

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But why is Sarb approval required?

Ndlovu explained that South Africans are required to pay income tax and capital gains tax on both local and foreign assets, even if they are no longer residing in the country, but they can be released from local tax obligations by providing evidence of their intention to permanently reside outside South Africa.

He said that if they want to transfer more than R10 million offshore, they need to go through an additional verification process by South African Revenue Service (Sars) and seek approval from Sarb’s Financial Surveillance Department, which is responsible for detecting and preventing money laundering.

What does the actual application process entail?

“There’s a misconception that, since the change to the emigration process, Sarb approval is no longer a factor when emigrating. However, when it comes to substantial funds leaving the country, Sarb will always be involved,” he explained.

Typically, taxpayers will start by engaging an authorised dealer, which is usually their own bank, to facilitate the transfer after providing the requested documentation and a TCS PIN, according to Ndlovu’s advice.

“Even at this initial stage, authorised dealers are not always clear about which documents they need so our clients usually approach us first, as we already know from experience what is required,” Ndlovu said.

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After the taxpayer engages with an authorised dealer, Ndlovu said that Sars will conduct a verification process for approval of foreign investment allowance. This process will require supporting documents and declarations to be provided to the tax authority, which can be demanding, according to Ndlovu.

Finally, the taxpayer can approach Sarb’s Financial Surveillance Department through their authorised dealer, with their TCS PIN in hand, to seek approval for their transfer. Here they will face another round of questions and requirements.

“They then return to their authorised dealer, who still has to follow its own processes before releasing the funds.

“It must be mentioned that Sarb now requires a relevant TCS PIN for every transfer offshore, with the relevant funds to be transferred cleared by Sars,” he said.

Compiled by Devina Haripersad