South Africa’s financial emigration system has changed – here are the new rules

In its 2021 national budget, Treasury said that amended rules around financial emigration are set to come into effect from 1 March 2021.
Financial emigration is the process used by many South Africans abroad to formalise their non-resident status for both tax and exchange control purposes.

“Since the initial announcement, there has been zero public consultation, draft Regulations or anything else publicly released on exactly what the new process will look like,” says Jonty Leon, legal manager at Tax Consulting South Africa.


“However, finally the South African Reserve Bank (SARB) has released its comments to authorised dealers on how the new regime will commence.”

New rules
With the new regime comes a host of positive and negative changes, said Leon.

“Positive is that the antiquated legislation around exchange control for the process is completely falling away.

“However on the other hand, the tax treatment of the process will be more stringent with a focus on tax residency only, potentially making it more onerous to overcome the burden of proving non-resident status.”

The following is falling away from the financial emigration process:

  • SARB MP336(b) form and application;
  • Requirement for an authorised dealer to attest the application;
  • Requirement of SARB approval before conclusion of the application; and
  • Archaic restrictions on bank accounts after they have been converted into non-resident accounts.

The new financial emigration process will include:

  • A focus from SARS specifically on tax residency in terms of the South African tax residency tests;
  • The application for an Emigration Tax Clearance Certificate, with supporting documents to prove non-resident status;
  • An “exit tax” calculation on worldwide assets, in terms of section 9H of the Income Tax Act;
  • A stringent audit by the SARS auditors and potentially by the dedicated SARS Foreign Employment team; and
  • Approval by SARS before any funds may be expatriated by an authorised dealer based on emigration.

Tax residency
Leon said that tax residency in South Africa is determined by two tests – namely, the ‘physical presence’ and the ‘ordinarily resident’ tests.


“Many think that by merely not living in South Africa currently, they are therefore not tax resident of SA. This is an extreme over-simplification and has got many in trouble with SARS in the past.


“Careful consideration of all aspects of both tests must be undertaken on an individual basis with a taxpayer, determining on a balance of probabilities whether they are able to overcome their burden of proving non-residency.”
Leon said that South Africans should be cautious when rushing into making this declaration to SARS when this is not truthful, or provable with objective evidence.
Even making a mistake these days can land one in hot water, especially after the amendment to the Tax Administration Act which removed the term “wilfully” when handling non-compliance.


“This amendment has provided SARS with greater clout to hand over taxpayers for prosecution, when claiming negligence or a mistake”.

Supporting Documents for Emigration

When you apply for a Tax Compliance Status (TCS) in respect of emigration, you are required to submit the following supporting documents.

For a new Tax Compliance Status (TCS) application:

  • Where the TCS application is for a first time emigrant:
    • Statement of assets and liabilities for the previous three tax years (this should include disclosure of all investments, loan accounts and distributions from local and foreign companies, trusts, etc.)
    • The MP336(b) – ‘Emigration: Application for foreign capital allowance’ that is authenticated by the stamp of the Authorised Dealer (e.g. bank) concerned and the signature of one of its Authorised Officers, where such MP336(b) form has been attested, i.e. stamped and signed by the Authorised Dealer on or before 28 February 2021. All applications from Monday, 1 March 2021 onwards will be processed by SARS based on a new dispensation of confirming that the taxpayer has ceased to be a resident for tax purposes. SARS will therefore no longer require a Form MP 336(b) as part of the TCS application process; or
    • Where the authorised dealer (e.g. bank) informed you not to complete the MP336(b), for applications received prior to 01 March 2021, the authorised dealer must provide a letter stating the reason(s) why the MP336(b) should not be completed.
    • Where the MP366(b) is no longer applicable, relevant proof that you have ceased to be a resident for tax purposes in South Africa, including the date on which you ceased to be a resident.
    • In case where you emigrated without formalising your emigration with South African Reserve Bank (SARB) or have emigrated a very long time ago and as such have no assets and liabilities in South Africa a Nil Statement of assets and liabilities for the previous three tax years must be submitted.
    • Applicable Power of Attorney where the TCS application is submitted by a person other than the taxpayer.
    • Capital Gains Tax calculation on the deemed disposal of assets on the day before the taxpayer cease to be a resident.
      • This is applicable where amounts are included under listed and unlisted investments as well as other assets (e.g. Kruger Coins).
  • Where the applicant is a member of a pension, provident or retirement annuity fund, the following particulars in respect of each fund must be submitted on a separate sheet:
    • Name of fund;
    • Expected lump sum amount to be paid out; and
    • Date of expected payment.
  • Where the applicant has a South African insurance policy, the following particulars in respect of each South African insurance policy the taxpayer own must be submitted on a separate sheet:
    • Name of insurance company;
    • Address of insurance company;
    • Policy number;
    • Date on which any benefits from the policy are expected; and
    • Particulars of expected future benefits from such policy.
  • Where the applicant, wife or minor children are beneficiary of a trust, the following particulars must be submitted on a separate sheet:
    • Name of the trust;
    • Income tax reference number of the trust;
    • Name(s) of the trustee(s);
    • Postal address of the trust;
    • Business address of the trust;
    • Nature of income received from the trust and the annual amount thereof;
    • Date on which you first received income from the trust;
    • Monthly or yearly amount received from the trust.
  • Where the applicant, spouse or minor children are the shareholder(s) of a private company or member(s) of a close corporation, the following particulars must be submitted on a separate sheet:
    • Name the private company/close corporation;
    • Income tax reference number of private company/close corporation;
    • Number of shares/percentage of interest;
    • Postal address of private company/close corporation; and
    • Business address of private company/close corporation.
  • In case of a family unit, if the spouse wishes to be issued with a separate TCS in order to formalise his/her emigration, then the spouse must do the following:
    • Complete a separate TCR01 – Tax Compliance Request form
    • Submit a certified copy of the final MP336(b) submitted to the authorised dealer (NOT a copy of the MP336(b) submitted by the husband/life partner), where such MP336(b) form has been attested, i.e. stamped and signed by the Authorised Dealer on or before 28 February 2021; and
    • In cases where the MP366(b) is not applicable, submit relevant proof that the taxpayer has ceased to be a resident for tax purposes in South Africa, including the date on which the taxpayer has ceased to be a resident.
    • Submit the supporting documents in support of the application.

 Note: The above will not apply where the family unit is emigrating together and the details of the spouse are captured in the TCR01. In this event, the TCS PIN letter for the applicant will include the details of the spouse (that is, names, tax reference number [if applicable] and ID number or passport number).

THE SPECIFIC DOCUMENTS REQUIRED FOR EMIGRATION APPLICATIONS TO DEMONSTRATE THE SOURCE OF CAPITAL

  • Loan:
    • Where the parent lends money to the child to invest offshore:
      • Loan agreement; and
      • Bank statement of parent, not older than 3 months.
    • The trust lends money to the trustee or beneficiary to invest offshore:
      • Loan agreement; and
      • Bank statement of trustee or beneficiary, not older than 3 months;
      • Latest Trust Financials;
      •  Bank statement of trust, not older than 3 months; or
      • Trust’s latest share portfolio statement (not older than 3 months). This statement will also include the amount of shares and current market value.
    • The company lends money to a director of the company to invest offshore:
      • Loan agreement between the company and the director;
      • Bank statement of the director, not older than 3 months; and
      • Company’s latest annual financial statements.
  • Donation:
    • If the donation is between spouses:
      • A declaration (IT144) ; and
      • Bank statement of donee, not older than 3 months
    • If the donation is not between spouses:
      • A declaration (IT144)
      • Proof (Copy of the receipt) of donations tax paid; and
      • Bank statement of donor and donee, not older than 3 months.
  • Inheritance:
    • Letter from the executor of the estate;
    • A copy of the Liquidation & Distribution account; and
    • Bank statement, not older than 3 months.
  • Savings / Cash / Bank Account / Fixed Deposits:
    • Bank statement, not older than 3 months; and
    • Proof of source (i.e. where and how the money was obtained).
  • Investment income – Local and foreign
    • Schedules of the interest / dividends received indicating the source and amount of interest / dividends.
  • Shares:
    • Portfolio statement not older than 3 months. This statement will also include the amount of shares and current market value.
  • Sale of property:
    • Original letter of the Conveyancer to confirm the transfer of the property and that the money will be transferred from his/her trust account; or
    • Proof of receipt of the proceeds together with applicant’s bank statement not older than 3 months.
  • Royalty Income:
    • Source of royalty income; and
    • Proof of royalty payment.
  • Earnings:
    • Where a recurring foreign investment does not exceed R30 000 per annum a copy of a salary slip is needed once a year;
    • The policy number; and
    • It must be noted that the institution (e.g. Sanlam / Old Mutual) will apply on your behalf.
  • Distributions from a trust:
    • Resolutions from the Trust making the distributions;
    • Details of the source from the Trust making the distribution;
    • Bank statement of trust, not older than 3 months; or
    • Trust’s latest share portfolio statement (not older than 3 months); this statement will also include the amount of shares and current market value.
    • Copy of trust deed; and
    • Trust’s Annual Financial Statements.
  • Income from any entity, local or foreign, in which the taxpayer holds a direct or indirect beneficial interest
    • The nature of relationship with the entity.
    • Proof of amounts/distribution received from such entities.
    • If owner of any businesses, the company group structure, profile and other group investments.
    • If a director of company or member of a Close Corporation is a shareholder, a shareholder’s agreement and share incentive scheme agreement.
  • Other:
    Documentary proof and explanation.
  • Where the TCS application is for Emigrant’s remaining Assets (formerly known as “Blocked Funds”):

Note: The “Emigrant’s remaining Assets” option is only applicable to TCS requests received/applied for from SARS before 01 March 2021

    • A copy of the Tax Clearance Certificate (TCC) or TCS PIN letter – Emigrant that was previously issued by SARS.
    • A copy of the MP336(b) application previously submitted.  If no MP366(b) is submitted, a letter from the Authorised Dealer indicating the reason why the MP336(b) is not available;
    • Addendum stating the intended amount to be transferred; and
    • A Duly completed Power of Attorney by the taxpayer (only if the application is submitted by the taxpayer’s representative).
    • Taxpayers who already emigrated and who want to transfer ‘Emigrant’s Remaining Assets’ need to request a TCS for FIA via eFiling or at a SARS Branch​. When applying for the TCS in respect of FIA, you need to set the ‘Source of capital to be invested’ to ‘Emigrant’s Remaining Assets’.