The legislative framework will still be based on the Currency and Exchanges Act of 1933. Flowing from these proposed changes, many other types of cross-border payments, especially ‘current account’ type payments, would in due course become free of restrictive control measures, which have been in place for many years.
This new Capital Flows Management system will likely be substantially completed in the course of 2021 and during this period the removal of certain restrictions, from an Exchange Control point of view will be announced, as and when ready for implementation.
Over the last number of months, much has been said about the phasing out of the concept of ‘emigration’ from an Exchange Control perspective and in particular, if this would adversely affect an individual’s ability to access ‘lump sum’ payments from Provident Funds and Retirement Annuities, in the event that they undergo an emigration process.
It was made evident recently that emigrations formalised via a customer’s Bank prior to the end of February 2021 would not disrupt the status quo, in respect of such assets, but from 1 March 2021 revised administrative practices, in respect of overall emigration procedures and arrangements, would be applied. Details of these revised practices have now been made public and we will endeavour to summarise the key elements, in this blog.
We are sure that it will be pleasing to many, but perhaps not all, to understand that from 1 March 2021, the concept of ‘emigration’, as recognised by the South African Reserve Bank and which was always an administratively cumbersome feature of related Exchange Controls, has been 'phased out’ and will be replaced with a verification process, where the South African Revenue Service (SARS) will now play the key role, in the administration of applications pertaining to private individuals ceasing to be a South African resident, for tax purposes. However, to put a ‘dampener’ on things, it has become evident that what was previously seen to be onerous Exchange Control requirements, have now been replaced by somewhat robust SARS verification procedures. For those with complex asset positions, the ‘filing’ process may not necessarily be straightforward and the assistance of an Accountant or qualified Tax Advisor, to obtain the Tax Compliance Status -TCS Emigration PIN letter, may well be beneficial. Without this document, a local Bank will not be able to transfer any funds offshore and in fact, the relative Tax procedures will need to be followed irrespective of whether the individual intends to transfer any funds at all, at the time he/she ceases to be a resident for tax purposes. It seems that via their verification process SARS will be the body, going forward, charged with the responsibility to determine the transferability of funds to such parties, both capital and income, inclusive of distributions from the likes of Inter Vivos Trusts, etc.
Once an individual has finalised the TCS procedure with SARS, has formally cleared his tax residency status, and dealt with all tax compliance requirements, their Bank will be allowed to make the following transfers offshore.
It is also worth noting that under the new framework implemented with effect from 1 March 2021, natural persons, emigrants, and natural persons, residents will be treated identically. The current arrangements where remaining assets of emigrants were controlled in Capital accounts or special “blocked accounts” will no longer apply and transfers from these accounts will be handled in line with any other foreign capital allowance transfer.
The authorities have indicated that as part of these revised arrangements, assets that were previously ‘blocked’ in terms of specific Financial Surveillance directives, in terms of Exchange Control Regulation 4(2) may now be dealt with as follows.
It is also important to note that taxpayers will be able to access lump sum retirement benefits, provided the member has remained a non-tax resident for at least three consecutive years. A tax directive needs to be issued to the fund and before a Bank can make any related transfer, they will need to be provided with an applicable TCS document from SARS, as well as documentation from the Fund confirming the final amount to be paid out to the taxpayer. Should further information be required, in this connection, it is recommended that SARS be approached for clarification.
Insofar as these vised processes are concerned, it is early days in the implementation. However, Beztforex can provide appropriate guidance, in respect of such arrangements and will of course provide any further updates or information, should more detail or important facts be published. It does nonetheless seem apparent that SARS will now play a “lead role” in the relative administration and will be the party issuing ‘directives, going forward. In the circumstances, we can recommend highly skilled accountants, to provide specific professional guidance, should such assistance be required and Beztforex can of course also assist with the transfer of applicable allowances, once all Tax compliance conditions are completed.
If you need to speak to us about a general query fill in the form below and we will call you back within the same working day.