Overseas landlords to wait longer for rent

Your overseas landlords must now complete an application for an international transfer (AIT) to move their rental income out of South Africa.

Previously, only capital transfers by non-residents required an AIT. But the South African Reserve Bank’s Financial Surveillance Department has now issued guidance extending the requirement to more forms of income, including rental income, dividends and trust distributions. The rules for residents are unchanged. Non-residents must now obtain either a tax compliance status (TCN) PIN under the AIT process from the South African Revenue Service (SARS), or – if they are not registered taxpayers – secure a manual letter of compliance from SARS.  

The guidance applies to any out-of-country transfer by non-residents. By contrast, SA residents can transfer up to R1 million per calendar year out of the country without tax clearance under the Single Discretionary Allowance, but there’s no such allowance for non-residents – AIT is required for every transfer, regardless of amount.

What is the likely impact?

The new guidance could mean longer delays for overseas landlords to access rental income. SARS aims to process AIT applications within 21 business days, but the process can be slower if they need to ask for additional information from applicants. There’s also a hefty administrative burden: applicants need to prove both their non-residency status and the source of their funds, including bank statements and asset declarations covering the past three years.

Agents may be able to help landlords compile proof of rental income, especially if they have PayProp’s automated accounting system with bank integration and auditable transaction logs to help them. If landlords want, PayProp-powered agencies can also hold rental income for them in the PayProp Property Account, where it is kept secure and earning interest until they are ready to transfer it overseas compliantly.

South Africa is one of around just 30 countries worldwide that maintain foreign exchange controls. The International Monetary Fund forbids its 191 member states, including South Africa, from restricting most international payments except as a “transitional arrangement”, meaning that countries with foreign exchange controls are required to gradually phase them out over time.  These restrictions create higher barriers for non-resident investors compared to most other markets.

As such, industry experts warn that the new rules could discourage new investment in South Africa, or even prompt existing investors to divest. The Institute for International Tax and Finance, which offers tax advice to non-residents, has called it an own goal,  arguing that it adds red tape and undermines efforts to attract foreign capital after South Africa’s recent FATF grey list exit.