Speaker 0:
Hello and welcome to this. Boutiques connect. I'm joined today by Lauren Walker, head of sales at Currency Partners. Welcome back, Lauren. Thanks, Larry. Nice to be here. So Lauren, as a has recently announced a change to the, um, foreign tax clearance application process, which caused quite a bit of panic and confusion.

Speaker 0:
Um, can you explain this change, Uh, in a little bit more detail for us?

Speaker 1:
Yes. So on the 24th of May this year, um, a new process was brought out. Um, but maybe just explain the basics and start there. So as we all know it, for South African residents, they can externalise 1 million rand in a calendar year

Speaker 1:
under their single discretionary allowance. You also have a 10 million rand allowance you can do within a calendar year and your foreign capital allowance. But in order to use your foreign capital allowance, you need a tax clearance certificate. And that application process for that tax clearance certificate is what has changed. It's now called an approval for international transfer, or we refer to as a IT to make it easy,

Speaker 1:
so that can be a little bit confusing, because the term has changed a little bit, Um, and effectively, what they've done is they have merged the process of the tax clearance application for a tax migration individual or someone that has ceased to be a tax resident

Speaker 1:
with a South African resident who wants to invest offshore through their foreign capital allowance. So it's quite smart because what it's done is it made it easier for our tax practitioners, our accountants, and for clients to be able to do the process through the same or effectively emerge those processes. So they are doing it the same way. But on that process, they will indicate whether they've done tax migration or not.

Speaker 0:
So then, what are the major changes that have taken place with regards to to this

Speaker 1:
process? So I think there's four main question

Speaker 1:
that have been added to the process, um, and the application process. I think that's probably where we can start. The first one is really the most important. And what shows the consolidation between tax migration and the normal tax clearance application process? They ask whether you're a resident or non-resident taxpayer there, you're effectively telling them whether you've completed tax migration or the previously known financial immigration. And if you confirm that you are a non-resident taxpayer, they are gonna ask you to confirm what date you ceased your tax residency.

Speaker 1:
Um, And whether you did that application as a family unit or as an individual, the second question is around trusts. They want to know if you are a beneficiary of a local offshore trust. And if you confirm that you are, then they ask questions around that trust. Things like the trust name, um, the tax number of the trust and the trust number. Um, so nothing major stuff everyone should have on hand. Um, the third question is around whether you have a loan to a trust and that trust again, local offshore.

Speaker 1:
And again, if you confirm you, do they ask that same set of questions around the trust and then they'll want to know the value? Obviously, um, and then the last question is around entities. So if you are a 20% shareholder, 20% or more, um, of a local offshore entity. Um, and there they will. Then if you confirm that you are, they're going to ask you the entity name. Um, the registration number of that entity and then your shareholding. So just to confirm what that percentage and value is,

Speaker 0:
so then do all of these additional questions require more admin and more supporting documentation.

Speaker 1:
I think that's where a lot of the panic came in. So we do about 100 of these applications a month, and to date we haven't been required to send any additional, um, supporting documentation other than the source of funds that's usually required.

Speaker 1:
Um, from our side, it looks like they're just trying to make sure that those everything around an individual is tax compliant effectively. So they're checking that your trust and your entities, et cetera, are tax compliant.

Speaker 0:
Lauren, Then so has anything changed in the process of submitting your three years of assets and liabilities?

Speaker 1:
Um, so it's a bit of a strange one, I think, from a regulation perspective. They stated now that you need to declare your worldwide assets and liabilities.

Speaker 1:
But the feedback we've had from a lot of our advisors that do a lot of offshore, um, is that they were doing that anyway because they were doing so much offshore that they knew that those assets and liabilities were important when doing your declaration to SARS. So that was being declared anyway. So although for some people it seemed overwhelming that that was in the new regulation, we're not seeing that as being an issue in terms of having to declare that.

Speaker 0:
So we've discussed the change in the process for S a residents, um, living abroad or investing abroad rather. But how does this impact South African residents that are living abroad? Um, and applying for their for their a IT.

Speaker 1:
Yeah. So it's interesting because I think what a lot of people don't know is when you're doing the A IT now and you're saying that you live in the UK, for example, um, and that you have ceased to be a tax resident. You're saying that I live in the UK. I'm a tax resident there, and I'm no longer I'm a non resident taxpayer in South Africa.

Speaker 1:
The first important thing around this is that when you do tax migration, you're not required to sell your assets in South Africa. All you're doing is you're saying I'm now a non-resident taxpayer, and so what people need to understand is that when you become a tax resident in another country. There's a tax treaty there, so South Africa have got tax treaties with 91 jurisdictions around the world, and that tax treaty will apply. So let's maybe look at an example, because that makes it a bit easier

Speaker 1:
in the UK where we know a lot of South Africans live. Um, from the first date that you become a tax resident in the UK, you're actually obliged to cease your tax residency in South Africa. Um, if we look at Australia, for example, there's a two year rule. So from two years of being a tax resident in Australia, you are obliged to cease your tax residency in South Africa again to emphasise that you don't have to sell your assets here. You just need to go through that tax migration process, um, to get confirmation that you are no longer a tax resident in South Africa

Speaker 1:
and the tax migration, which is that process you're doing. Um, it's not like the old financial immigration, so you don't have to close bank accounts and have a blocked rand account in that whole story, which is not great. And the new process just means that your residency status changes with SARS. Um, but not a lot of people are aware of that. And I think it's important to understand that. So

Speaker 0:
and then would South African residents face any more more restrictions?

Speaker 1:
No, I think that was part of the panic. So I think when the process came out, it was perceived that you now are more restricted in terms of trying to get money out of South Africa. And we know that a lot of South Africans invest abroad effectively. The 1,000,010 million still stands. We're still doing a lot of special approvals for those values that are over those annual allowances. So 40 million, 100 million,

Speaker 1:
Um, and they're still coming back. Approved. The approval rate we're seeing is still around 98.5% over the 100 We do every month. Um, and the only time it comes back declined is when someone is not tax compliant. And they said they were, so there may be something outstanding that they weren't aware of. Um, but other than that, there hasn't been a restriction. Those values from a reserve bank application perspective have not moved. So the 1,000,010 million

Speaker 1:
and overall, we're seeing the process running as it always has. Um, I think what's important for people to understand is just really the detail and understand why it's being done. But they shouldn't be worried about it.

Speaker 0:
OK, thank you very much, Lauren. We appreciate your insight. Thank you for your time. Thanks,

Speaker 1:
Larry, for having me.