The South African Reserve Bank’s decision to increase the single discretionary allowance (SDA) from R1m to R2m — finally implemented after the budget speech — has been widely welcomed. It is a sensible reform, a belated acknowledgment that South Africans live more internationally mobile lives and deserve greater flexibility in managing their finances across borders.
However, for the growing cohort of South Africans who have emigrated and formally ceased their South African tax residency — estimated by the South African Revenue Service (Sars) to be more than 50,000 taxpayers — it changes almost nothing.
At the heart of South Africa’s exchange control framework lies a structural inequity: once you formally cease to be a South African tax resident, you lose access to the SDA entirely. You are no longer entitled to the annual R2m allowance that every resident South African, including those living abroad who have not formally ceased their South African tax residency, can use freely, year after year.
What you receive instead is a one-off travel allowance, now nominally aligned with the R2m threshold but available only in the calendar year in which you cease tax residency. After that you are permanently excluded from the SDA system.
The result is a perverse outcome: those who regularise their affairs and formally exit the tax system are subjected to a more complex, more restrictive and more costly set of exchange control rules than those who do not.
Many of these South African expats retain meaningful economic ties to the country: they may continue to earn salaries from South African employers, receive dividends from South African companies or draw pensions and annuities from South African funds, but their ability to access and transfer those funds abroad is materially constrained. The increase in the SDA changes none of that.
Tax emigration
Even the limited relief that does exist for emigrants often fails them in practice. The once-off travel allowance is theoretically available in the year tax residency ceases. In reality though, the formal cessation of South African tax residency is not instantaneous. It requires establishing non-residency under either the ordinarily resident test or an applicable double tax agreement, gathering supporting documentation and obtaining confirmation of foreign tax residency.
This process takes time. In many cases it extends well beyond the calendar year in which an individual physically leaves South Africa. The result is a fundamental mismatch between policy design and practical reality. The relief is structured around a timeline that does not reflect how tax emigration works in practice. By the time most emigrants have the necessary documentation for Sars to recognise their non-resident status, the window to use the one-off travel allowance has already closed.
If the policy framework is flawed, its implementation is often chaotic. Non-residents who continue to receive South African-sourced income must navigate a complex patchwork of rules governing when approval for an approved international transfer (AIT) tax clearance certificate is required.
These rules depend on the source of funds, the residency status of the recipient, the type of account held and a range of other factors that frequently trip up even experienced compliance officers at major banks. The result is a system where inconsistency is the norm.
Legitimate transfers are blocked or delayed, sometimes for months. South African-sourced income — salary payments, pension distributions, dividend flows — is effectively frozen while banks seek AIT tax clearance certificates where none are required.
Non-residents have, in some cases recently, been refused non-resident bank accounts unless they hold foreign passports, a requirement with no basis in exchange control policy. Each bank interprets the rules differently.
These are not isolated cases or administrative teething problems. They are structural failures observed regularly in practice by cross-border advisory firms such as the Institute for International Tax & Finance. They impose real financial costs, and that, over time, pushes emigrants to sever economic ties with South Africa not because they want to, but because navigating the system becomes too costly and too uncertain.
South Africa’s exchange control architecture was designed for a world of clean breaks and binary choices: you were resident, or you were not. You moved, you sold up, you severed ties. That world no longer exists. Today’s emigrants are often hybrid economic actors. They may operate South African businesses while living abroad, receive South African passive income while paying tax elsewhere, and maintain South African property, bank accounts and pensions while building lives in other jurisdictions.
Structural reform
The tax implications alone are complex. Where is remotely earned salaried income taxable? How are South African pensions treated in the hands of a non-resident? How do dividend flows interact with foreign tax systems? These questions require navigating not only South African tax law but also double tax agreements and the domestic tax rules of the foreign country. Even once the tax position is resolved, a separate, and often more frustrating, challenge remains: actually moving money.
The increase in the SDA after almost 15 years is a welcome signal of South Africa’s commitment to renewed exchange control liberalisation. However, it leaves a large and growing segment of South Africans out in the cold.
What is required is not incremental adjustment but structural reform: clear and simple rules governing when AIT tax clearance is required; alignment of exchange control treatment with the realities of tax non-residency; and, ideally, a reconsideration of whether the resident/non-resident distinction in exchange control still serves the country’s interests in an era of global mobility.
South Africa needs the continued economic participation of its diaspora, not policies that punish them for leaving. Until meaningful reform is undertaken, non-resident South Africans will continue to be trapped in a system where the rules are complex, their application is inconsistent, and the risks of delay and blocked funds often force them to seek professional assistance for what should be routine transactions.
For a country desperately seeking to retain global skills and capital, this is not merely an administrative failure. It is a strategic one.
• Kransdorff is CEO of the Institute for International Tax & Finance.
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