Tax Tuesday: Emigration II - Exchange control

In Emigration Part One, we looked at the different types of residency. We also highlighted that home affairs residency (citizenship, passports, visas, permits) for exchange control (excon) purposes and residency for income tax purposes are not the same thing.

In this blog, we explore the excon consequences of leaving South Africa and the practicalities involved.

Excon residency is generally a much wider concept than tax residency. In terms of the South African Reserve Bank (SARB) Exchange Control Regulations, a resident is any person who has taken up permanent residence, is domiciled or registered in South Africa.

The only way to terminate excon residency is through a formalised process with the SARB. Fortunately, the SARB doesn’t need to be approached directly, and the process can be undertaken through an authorised dealer. Generally, most commercial banks are authorised dealers.

Process

Your commercial bank will supply standard forms to be completed once you indicate your intention to emigrate. The two main documents required are:

The MP336(b) form (available either from the bank or online). The form is a summary of all assets and liabilities of the person, as well as some general information on departure dates and information relating to your country of destination. Importantly, some form of evidence should prove that the person indeed ceases to permanently reside in South Africa. Acceptable proof differs between the various commercial banks, but generally, a permanent residence permit or proof of citizenship from the destination country will suffice.
A tax clearance certificate needs to be obtained. Emigrants should ensure they obtain the correct type of tax clearance – specifically an Emigration Tax Clearance. The general good standing tax clearance certificate will not suffice for emigration purposes. SARS generally requires a copy of the MP336(b) form and a statement of assets and liabilities for the last three tax years in order to issue the tax clearance.

After the documents have been submitted, there is, on average, a six to eight-week turnaround time for the emigration to be formalised.

Transferring funds abroad

Persons who formally emigrate may remit the following funds abroad:

A foreign capital allowance of R20m per calendar year for a family unit or R10m per calendar year for a single person; and
A once-off travel allowance of R1m per person emigrating; and
Personal effects of R2m (provided relevant SARS Customs Declarations are obtained).

The process of ceasing to be an excon resident can be very drawn out and frustrating, simply because of all the different parties involved (SARS, the SARB, commercial banks etc.). Persons wishing to emigrate need to give themselves enough time (and patience) when undertaking the process. Getting assistance from someone who deals with this on a daily basis is strongly advised.

The South African Institute of Chartered Accountants has published a very useful guide on emigration, with some helpful FAQ’s.

Remember – ceasing to be a South African excon resident does not mean you cease to be a tax resident. You may still have tax exposure and filing obligation in South Africa. In our next blog, we will look at the tax consequences of ceasing to be a South African tax resident.

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