So what actually happened and what is the impact on you? Firstly, this is an update to the current process that you need to undergo to obtain your tax clearance, not a change in law and does not come from the South African Reserve Bank. In practical terms, the updates mean that with your application you need to disclose your “Local assets and liabilities” and your “Global assets and liabilities” (previously they just asked for “assets and liabilities”, with no distinction between local and offshore) and they are requiring more information on the source of the money you want to move offshore. Previously, simply stating “sale of property” or “savings” was sufficient, whereas now they want some documentation, such as a sale contract or investment statement.

In practice, these requirements have not been onerous, and the process has continued in much the same fashion as it did before.

The updating of the process comes on the heels of the SA greylisting and the government has been taking action to follow a prudent and detailed process so that South African investors and SA sourced funds are not seen as high risk. SARS has also found that, despite numerous amnesty and disclosure opportunities, and global tax reporting information now being shared, there are still many taxpayers not disclosing their offshore assets.

What are exchange controls and how have they changed?

Exchange controls were introduced in 1939 to restrict an outflow of funds and keep money invested in SA, with a stringent tightening in 1985 as sanctions were applied against South Africa. These restrictions distort the economy, interest rates, exchange rates and property prices.

After the punitive actions against SA were removed, there was broad agreement that exchange controls should be removed, but how and at what speed has been a contentious issue. While some support a “big bang” approach, removing all controls, the government agreed on a more gradual approach which commenced in 1993, so as not to disrupt the currency and the economy.