South Africans moving money abroad are facing a far more stringent regulatory environment, as new exchange control rules reshape how offshore transfers are processed and monitored.
The shift centres on a requirement that individuals secure an Approval of International Transfer (AIT) before funds can leave the country, according to a recent report by the South African Revenue Service (SARS) and highlighted by BusinessTech.
Under the previous system, taxpayers could rely on a tax clearance certificate confirming good standing to facilitate international transfers.
That process has now been replaced by the AIT, which introduces a more detailed application requiring full disclosure of financial positions.
Jonty Leon, who is the managing partner at Leap Group, described the shift as both a compliance overhaul and an enforcement tool.
‘I think it is both a compliance clean-up, as well as a bit of an enforcement mechanism that SARS is now using,’ the publication quoted Leon as saying in an interview.
He added that the AIT process allows authorities to assess an individual’s financial affairs more comprehensively before granting approval to move funds abroad.
‘Under the old system, all you needed was a good-standing tax clearance certificate, and you were able to move funds abroad,’ Leon noted.
‘Under the new system, the AIT is not just a form that needs to be filled out, but it’s an entire application process where SARS is able to dig into all of your affairs before they will allow you to move money out of the country.’
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Applicants must now declare whether they are South African tax residents or non-residents, a classification that carries significant implications.
Leon cautioned that incorrect classification could have far-reaching consequences.
‘If you are not noted correctly as a non-resident and you go and apply for an AIT, all of a sudden you’ve opened yourself up to SARS looking at your entire estate across the world,’ he said.
He noted that many South Africans living abroad may be unaware of their current tax status, particularly those who have spent years outside the country but have not formally updated their residency with authorities.
Alongside regulatory changes, banks have taken on a more active enforcement role. Financial institutions are now required to verify that AIT approval is in place before processing offshore transfers.
Without that clearance, transactions can be halted, and in some cases, accounts may be frozen until compliance issues are resolved.
‘If you try to move money outside of South Africa, but you don’t have the requisite approval from SARS, banks are now required to freeze your account,’ Leon said. ‘This until such time as you are fully compliant.’
The updated rules are expected to have a pronounced impact on South Africans living abroad, particularly those who may not have maintained full tax compliance.
Leon indicated that many individuals only become aware of gaps in their compliance when attempting to transfer funds, often under the assumption that their financial affairs are in order.
‘Every single one of our clients is someone who has realised that they aren’t actually compliant,’ he said.
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