South African expats face a major SARS battle

New SARS rules regulating South African-sourced income significantly tighten documentation, increase administrative burdens, and slow cross-border remittances for individuals and corporates.

At the end of October 2025, the South African Reserve Bank (SARB) introduced material changes to the processing of cross-border income transfers.

These measures are intended to reinforce compliance and enhance alignment between SARB and the South African Revenue Service (SARS).

However, Tax Consulting SA’s Head of SARB Engagement and Expatriate Compliance, Lovemore Ndlovu, explained that it will mean South African taxpayers living abroad face more complexity when transferring income.

These measures mean that no South African-sourced income may be remitted abroad until SARS has verified an individual’s non-resident tax status and overall tax compliance.

The amendments, communicated in Exchange Control Circular No. 15/2025, are now reflected in the Authorised Dealer Manual.

They apply to locally sourced income earned by South Africans living abroad. This includes rental income, trust distributions, directors’ fees, royalties, dividends, and pension or annuity payments.

The aim is to improve oversight and traceability. However, the revised framework also brings significantly more stringent documentation and verification requirements.

This will make it more difficult for Authorised Dealers, corporate clients, and taxpayers to transfer South African-sourced income abroad.

“Under the new framework, income transfers made by non-residents or individuals who have ceased to be South African tax residents will now require SARS verification before any funds can be transferred abroad,” Ndlovu said.

“Specifically, Authorised Dealers must be furnished with either an Approval International Transfer (AIT) Tax Compliance Status (TCS) PIN or a Manual Letter of Compliance (MLC) from SARS prior to processing.”

This represents a major departure from previous practice, where such income transfers could proceed without an AIT or MLC.

It adds considerable administrative complexity, particularly for recurring income, such as salaries or directors’ fees, that is still earned in the Republic.

“Some banks may allow recurring payments once initial documentation (such as IRP5/IT3(a) forms) is verified, but this remains subject to internal policy and SARS confirmation.”

Requirements for retirement funds and rental income

According to Ndlovu, changes relating to retirement and pension income are among the most notable. While some procedural relief has been introduced, the documentary burden has increased.

“Only pensions and/or annuities paid by registered retirement funds or licensed insurers may now be transferred offshore. Payments from unregistered entities are excluded.”

Non-residents and individuals who have ceased South African tax residency may now transfer their compulsory annuities – including living annuities – and pensions.

They may also transfer any late payment interest abroad, without obtaining an annual Good Standing TCS PIN.

However, qualifying payments must be reflected on an IRP5/IT3(a) under SARS tax codes 3602 or 3652. Authorised Dealers must also receive supporting documentation from the fund, administrator, or insurer.

This includes documentation such as the latest IRP5/IT3(a), a payment advice confirming the relevant tax code for a new annuity or pension, or a payment advice showing the codes under which income will be reported.

“Verification is required only at the inception of a new contract or before the first payment of the following tax year for existing contracts. Once confirmed, subsequent transfers may proceed without repeated documentation.”

Ndlovu explained that transferring rental income from a South African property, whether fixed, movable, or part of a rental pool, is also subject to enhanced scrutiny and approval.

Authorised Dealers may only allow such transfers if certain conditions are met. First, the application must be accompanied by a copy of the rental or rental pool agreement.

The client must also provide written confirmation that the rental amount is reasonable in relation to the property’s value.

Finally, the transfer may only take place if one of the following SARS compliance documents is obtained:

A Manual Letter of Compliance – International Transfer (MLC) for beneficiaries not registered on the SARS database; or
An AIT TCS PIN for beneficiaries registered on the SARS database.

“In practical terms, this means that non-residents receiving ongoing rental income will need to apply for SARS compliance verification each time funds are remitted abroad.”

“For property investors with monthly rental flows, this introduces a repetitive and time-consuming compliance process.”

Implications for corporates and financial institutions

For corporates managing cross-border payrolls, expatriate compensation, or offshore remittances, Ndlovu said the new rules will require greater coordination between tax, compliance, and treasury functions.

Authorised Dealers will also bear a heavier administrative responsibility to verify documentation and ensure SARS validation is obtained before processing transactions.

These added requirements will potentially extend turnaround times for their customers, Ndlovu warned.

While Exchange Control changes aim to close compliance gaps and strengthen the regulatory link between the SARB and SARS, they also make the process of transferring funds abroad more stringent and administratively demanding.

“The changes signal SARB’s firm stance on tightening exchange control compliance, especially concerning income, rental, and pension-related transfers,” Ndlovu said.

To avoid delays or interruptions in offshore remittances, he advised affected individuals and corporate clients to work with professionals who can ensure tax obligations are up to date and obtain the required SARS documentation.

He stressed that professionals must understand exactly what clients need for each type of source of funds to transfer income abroad.