SARB Exchange Control Tightening: Mandatory SARS Compliance For Non-Resident Income Remittance

A Fundamental Shift in Exchange Control Policy

The South African regulatory environment governing cross-border financial transactions has recently undergone a dramatic and unexpected overhaul. In late October 2025, the South African Reserve Bank (SARB), via its Financial Surveillance Department (FinSurv), quietly published an updated iteration of the Currency and Exchanges Manual for Authorised Dealers, following the issuance of Exchange Control Circular 16/2025 in September 2025. This move represents a material tightening of exchange control requirements, abruptly reversing the trajectory of gradual liberalisation observed over recent years. The new rules are of critical significance to any non-resident, including individuals who have formally ceased South African tax residency, who receives South African-sourced income.

The Core Compliance Mechanism: Linking Excon to SARS Tax Status

The central tenet of this regulatory adjustment is the mandatory linkage of exchange control clearance to tax compliance. Authorised Dealers (ADs)—South African banks—are now legally obliged to satisfy themselves that a non-resident recipient is tax compliant with the South African Revenue Service (SARS) before funds derived from South African sources may be remitted offshore.

To affect this compliance, non-residents must now obtain formal SARS approval via one of two mechanisms:

• TCS-AIT PIN: The Tax Compliance Status Approval for International Transfer PIN, required if the non-resident individual or entity is registered on the SARS database.
• Manual Letter of Compliance (MLC): This is mandated where the non-resident recipient is not registered with SARS.

This requirement applies across a broad spectrum of income payments, including dividends, profits, rental income, trust distributions, royalties, director's fees and pension or annuity income. The regulatory onus now places the AD in the role of a primary compliance gatekeeper, meaning any failure to secure a valid PIN or MLC will result in the immediate blockage of the transfer.

Acute Challenges: Dividends, Recurrent Payments and the MLC Burden

The policy shift creates pronounced operational hurdles, particularly for unregistered non-residents. The most challenging scenario involves dividend payments to foreign shareholders. Since many foreign shareholders are not registered SARS taxpayers—as their primary liability is settled via withholding tax—they will now be required to obtain an MLC to remit their proceeds, even if their shares are formally endorsed as 'Non-Resident'. A key uncertainty remains regarding the administrative frequency required by SARS: it is currently "unclear if a new MLC must be obtained for each dividend payment, or whether it is a 'once for all' process". If repeated applications are required, the administrative friction will dramatically increase the compliance cost associated with holding South African securities.

Furthermore, for registered non-residents transferring capital, the threshold is immediate: non-residents are no longer eligible for the R1 million Single Discretionary Allowance (SDA) available to residents, meaning all capital remittances require AIT approval. While certain recurring income streams like pensions may be allowed by some ADs based on initial verification, this is subject entirely to the specific bank's policy and ongoing verification.

The process of obtaining the MLC for unregistered clients is highly onerous. It requires the applicant to submit a full application package directly to SARS, detailing, amongst other strict requirements, a Statement of Assets and Liabilities covering the previous three tax years. This level of retrospective disclosure confirms that SARS is using the exchange control mechanism to enforce a rigorous retrospective tax integrity review, which will inevitably lead to substantial delays in the processing of applications.

The Trap for Historical 'Financial Emigrants'

The new compliance regime creates a significant difficulty for individuals who previously relied on the older, SARB-centric process (pre-1 March 2021) to sever their financial ties with South Africa. The historical SARB 'emigration' process, confirmed via the attestation of Form MP336(b), has been phased out and replaced entirely by a process focused on confirming the cessation of tax residency with SARS.

Individuals who historically 'financially emigrated' now face the prospect that their prior designations may be deemed insufficient for remitting income under the tightened rules. ADs are explicitly required to seek formal SARS confirmation of non-residency and the contemporary AIT/MLC clearance. Without the current formal SARS Letter of Confirmation for Non-Resident Tax Status, individuals may be compelled to effectively complete the full, contemporary "tax emigration" process to satisfy their ADs, thereby triggering a new audit of their historical tax affairs, including the deemed disposal calculation (Exit Tax).

The new SARB requirements represent a material operational risk to non-residents managing their financial affairs in South Africa, signalling decisive enforcement of tax compliance through exchange control mechanisms.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.