South African individuals can transfer up to R1 million offshore per calendar year without obtaining a Foreign Tax Clearance Certificate, known as the single discretionary allowance. If South African individuals wish to transfer more than R1 million offshore in a calendar year, they may use their foreign investment allowance (“FIA”) to transfer up to R10 million offshore. To utilise your FIA, you must have a valid Tax Compliance Status (“TCS”) Pin Letter for FIA. South African individuals who ceased to be South African tax residents or previously financially emigrated and want to transfer remaining South African funds offshore must also apply for a TCS Pin Letter for FIA.
You can apply for a TCS Pin Letter for FIA through the TCS status functionality via SARS efiling. Your tax compliance status must reflect as compliant to apply for an FIA. You will need then need to indicate the following on the relevant application form:
- the amount you wish to invest offshore;
- the source of the capital you want to invest offshore;
- the type of offshore investment; and
- the country where you will make the majority investment.
SARS requires the following supporting documents with every application for a TCS Pin Letter for FIA:
- Proof of the source of the funds to be transferred (e.g. bank statement or loan agreement);
- A statement of assets and liabilities for the previous three tax years; and
- A power of attorney if someone is applying on your behalf.
While the standard turnaround time is 21 business days, there is a general delay in the processing of the TCS Pin Letter for FIA applications by SARS. Another challenge individuals face arises when they indicate that the source of the funds is a loan or investments held. SARS often insists that the amount to be transferred offshore must reflect as available cash in the individual’s bank account. SARS does not recognise that individuals might not proceed with the relevant transactions, even if the FIA is approved.
Irrespective of these challenges, individuals wishing to invest more than R1 million, up to R10 million, must obtain the TCS Pin Letter for FIA. To minimise delays, you should ensure that all the required documents and information are full and complete.