South Africa Enforces New Rules to Transfer Funds Abroad
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The South African Revenue Service (SARS) has made regulatory changes to transfer funds overseas, allowing residents to move capital exceeding their annual discretionary allowance of ZAR 1 million.
Before regulatory updates, individuals could use their Foreign Investment Allowance (FIA) to move up to ZAR 10 million abroad annually through an authorised dealer. The tax compliance obligations were minimal and typically involved getting a tax compliance status number, depending on whether the individual was investing overseas or emigrating.
The newly revised tax compliance status process mandates citizens to complete an “Approval International Transfer (AIT) application” for moving funds abroad exceeding their yearly discretionary allowance of ZAR 1M annually. According to law firm Eversheds Sutherland, these applications necessitate a substantial increase in the provision of supporting documentation and disclosures.
The law firm adds that all AIT applications should submit the source of funds to be invested, either local or foreign. Applicants must also submit a statement of investments and penalties for the last three years. This status is considerably more demanding as it requires truthful and precise disclosures regarding the origin and type of funds to SARS and the South African Reserve Bank. Nevertheless, the existing single discretionary allowance of ZAR 1 million every calendar year remains valid for individuals, and this additional process is not essential for moving capital below that threshold.
The Financial Action Task Force (FATF) placed South Africa on its ‘grey list’ of countries under rigorous monitoring in February 2023. The country has rapidly enforced many new regulations to remedy the situation. The South African government is putting forward the measure as part of its efforts to exit the FATF grey list.
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