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Foreign Investment Allowance Tax Clearances | What you need to know

Over the last few years, South Africa has experienced a slowing economy to the point where we are currently in a technical recession with two quarters of decreases of the GDP. The political uncertainty and the credit downgrades have caused many to look offshore for investment opportunities, not only for better growth, but also for protection against a weakening Rand.

For investments of more than R1 million, the financial institutions moving the funds abroad will require a Foreign Investment Allowance (FIA) tax clearance certificate (TCC). Each person has an annual foreign investment allowance of R10 million, which should be approved if the taxpayer’s tax affairs are in order and the relevant material has been provided to the South African Revenue Service (SARS). It is also possible to apply for an FIA of more than R10 million, however, Reserve Bank approval is required for that.

It is now possible for us to apply for the FIA on our client’s behalf per the SARS eFiling system. As soon as the application is submitted, SARS opens a link for supporting documents to be uploaded and submitted electronically.

SARS requires, inter alia, the following supporting documents when the FIA application is reviewed for approval:

  • Relevant material that demonstrates the source of the capital to be invested.
  • 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.)
  • Relevant material for tax returns of the previous three tax years (this should include interest schedules, CGT calculations, financial instruments, etc.)
  • Details of the financial institution dealing with your foreign investment.

The reason SARS requests these documents is to make sure that any taxes owing to the fiscus because of the funds to be invested abroad are settled prior to allowing the funds to be transferred abroad.

The above-mentioned list is not exhaustive and SARS is very particular in what information is required.

If you are intending to make an investment abroad, we advise that you contact our tax department (tax@asl.co.za) or your relationship director to discuss what documents we will require to apply for the FIA tax clearance.