Alert: SARB Exchange Control Updates

SARB Exchange Control Updates

The Financial Surveillance Department of the South African Reserve Bank (SARB FinSurv) has issued new SARB Exchange Control Updates regarding the transfer of income to non-residents and individuals who have ceased tax residency in South Africa.

These SARB Exchange Control Updates strengthen the integration between exchange control and tax compliance, ensuring that all offshore transfers comply with both regulatory and tax requirements.

Capital Flow Management Framework

South Africa has historically maintained an extensive system of exchange controls, originally introduced during the apartheid era to protect the balance of payments and safeguard foreign currency reserves. Over the past three decades, however, South Africa has progressively liberalised its exchange control framework.

In 2020 the Government announced a decisive shift from a rigid exchange control regime to a Capital Flow Management Framework (CFM Framework), in line with international best practice and recommendations of the IMF and OECD.

The CFM Framework integrates closely with the South African Revenue Service (SARS), ensuring that all offshore transactions requiring approval or reporting are subject to tax clearance requirements and that exchange control approval is contingent on demonstrated tax compliance.

These SARB Exchange Control Updates reflect South Africa’s transition to the CFM Framework, which aligns exchange control oversight with tax verification to ensure transparency and regulatory integrity in all cross-border transactions.

1. SARB Exchange Control Updates: Income transfers to Non-Residents

Historically, income transfers to non-residents and individuals who have ceased South African tax residency was permitted, provided the bank who effected the transfer viewed a TCS – Good Standing at least once a year to verify that the individual is tax compliant. 

With the new SARB Exchange Control Updates this requirement falls away and, in its place, a Tax Compliance Status – Application for International Transfer (TCS – AIT PIN) is required. If the individual is not registered on the SARS database, a Manual Letter of Compliance – International Transfer is required. This new requirement is in respect of the following income transfers and is over and above the normal requirements relating to the specific income transfer:

• Dividends, Profits, and Income Distributions from quoted companies, non-quoted companies, and other entities.
• Directors’ Fees.
• Income distributions from testamentary and inter vivos trusts.
• Rental income.
• Member’s fees from Close Corporations.

This new requirement is for any transfer irrespective of the amount involved and a TCS – AIT PIN is required for each transfer.

2. SARB Exchange Control Updates: Transfer of Pension and Annuity Payments

SARB FinSurv has reviewed and updated the exchange control rules governing the offshore transfer of compulsory annuities, living annuities, and pensions (including late payment interest) from South African registered and approved retirement funds or licensed insurers. This SARB Exchange Control Updates aim to simplify processes for non-resident individuals while maintaining regulatory oversight.

Non-resident individuals, including individuals who have ceased tax residency in South Africa, may now transfer pension and annuity payments offshore without the requirement to obtain a TCS – Good Standing each year.

In terms of the SARB Exchange Control Updates, banks may process these transfers where the amounts are reflected, or will be reflected, on an IRP5 or IT3(a) tax certificate under the following tax codes:

• 3602 / 3652 (provided not accompanied by codes 3611 or 3661)
• 3603 / 3653
• 3610 / 3660
• 3618 / 3668

To support these transfers, the bank effecting the transfer must be provided with the most recent IRP5 or IT3(a) tax certificate issued for the pension or annuity payment (for example, the 2023/2024 certificate can be provided at the start of the 2025/2026 tax year) or a payment advice indicating the tax code under which the income will be reported for the first payment of a new compulsory annuity or pension.

The IRP5 or IT3(a) is required only at the inception of a new contract or, for existing contracts, before the first payment of the tax year following this SARB Exchange Control Update. Once provided, subsequent transfers may continue without the need for renewed confirmation.

Conclusion: The Interlink Between Exchange Control and Tax Compliance

These recent SARB Exchange Control Updates underscore the growing alignment between South Africa’s exchange control framework and its tax compliance regime. Exchange control and tax are inherently interconnected, both seek to ensure transparency, accountability, and the proper management of cross-border financial flows. By embedding tax verification within exchange control processes, the South African Reserve Bank and the South African Revenue Service are reinforcing a unified regulatory approach that supports the objectives of the Capital Flow Management Framework. This integration not only simplifies administration but also strengthens South Africa’s reputation for regulatory integrity in the global financial system.

ECAH’s Commitment to Staying Ahead with SARB Exchange Control Updates

At ECAH, we stay at the forefront of these regulatory changes, providing clients with timely, practical guidance that turns complex SARB Exchange Control Updates into clear, actionable strategies. By closely monitoring regulatory updates and engaging with the practical application of exchange control, we ensure our clients receive precise, up-to-date, and strategic guidance. Our goal is to help you navigate offshore transfers confidently, ensuring compliance while maximizing flexibility and efficiency.