Modern South African families are increasingly split across borders, with parents frequently remaining in the Republic while their children build lives overseas. Furthermore, despite relocating, many emigrants continue to hold local property, shares, businesses, or investment portfolios. When the time comes to transfer wealth to the next generation, cross-border families face a severe administrative reality: South African assets must be administered locally, while the outward flow of inheritances triggers complex exchange control and tax compliance hurdles. 

The physical relocation of a family member does not automatically sever their ties to the South African legal system. Whether you are an emigrant who has retained local assets or a resident parent leaving a domestic estate to children living abroad, your legacy remains anchored in the Republic. Any property, shares, businesses, or investment assets situated in South Africa must be administered locally under the Administration of Estates Act 66 of 1965. Consequently, when executors attempt to liquidate and distribute these assets to global heirs, they must navigate a maze of strict regulations enforced by the South African Reserve Bank (“SARB”) and the South African Revenue Service (“SARS”). 

Exchange control status of beneficiaries
For the purposes of transferring an inheritance offshore, SARB does not consider the beneficiary's current physical location but rather their formal exchange control and tax residency status.

Beneficiaries generally fall into three categories: 

1. South African residents temporarily abroad: This applies to adult individuals who have left South Africa but never formally ceased to be tax residents. To receive funds abroad, they must utilise their R2 million Single Discretionary Allowance (which does not require a tax clearance) or their R10 million Foreign Investment Allowance. To remit more than R2 million, the beneficiary must possess a valid South African ID, an active tax number, and obtain an Approval for International Transfer from SARS.

2. Emigrants (Tax non-residents): These are South African-born individuals who have formally completed tax migration (previously known as financial emigration). Any inheritance due to them is automatically restricted; this means the funds are legally restricted and cannot be freely remitted out of South Africa. The inheritance is effectively locked in a local account until the beneficiary provides a local commercial bank (“Authorised Dealer”) with proof of their tax non-residency and the required estate documents to clear the funds for offshore transfer.

3. Bona Fide non-residents: These are beneficiaries who were born outside of South Africa, hold a foreign passport, and were never South African citizens. Inheritances due to them are also restricted and require the executor to present specific estate documents (such as the Liquidation and Distribution account and Death Certificate) to an Authorised Dealer to release the funds.

The manual letter of compliance
If a beneficiary has formally emigrated and deregistered with SARS, they can no longer apply for a standard Tax Compliance Status PIN. Instead, they must apply directly to SARS for a Manual Letter of Compliance (“MLC”) before an Authorised Dealer can legally release funds abroad. Where the beneficiary remains registered on the SARS database, a TCS – AIT PIN (Tax Compliance Status PIN issued in connection with an Approval for International Transfer) must be obtained. However, the compliance burden differs drastically depending on the source of funds:

• Direct inheritances: If a deregistered non-resident receives a South African inheritance exceeding R10 million, an MLC is strictly required. Fortunately, if the inheritance is R10 million or less, this non-resident is exempt from the MLC requirement, and the funds can be remitted by an Authorised Dealer upon review of the standard estate documents.
• Trust distributions: SARS enforces a far stricter regime for trusts. Non-residents who receive any distribution from a South African Trust – irrespective of the amount – are strictly required to obtain an MLC. SARS will issue this compliance letter only once the local trust has successfully demonstrated that all tax liabilities associated with the distribution have been settled. 

Trust distributions to offshore beneficiaries
Many South African estate plans utilise testamentary or inter vivos trusts to manage and protect family wealth. However, distributing capital or income from a local resident trust to an offshore beneficiary is a heavily regulated process that triggers immediate tax and exchange control hurdles.

The tax trap for non-residents 
When a trust distributes income or capital gains to a local resident, the tax liability typically flows through to the beneficiary. This favourable pass-through principle does not apply to beneficiaries living abroad. Unless the income is attributed back to a South African resident donor under anti-avoidance provisions, any income or capital gains vested in a non-resident beneficiary cannot flow through and must be taxed within the South African trust itself. This exposes the distribution to the trust's punitive flat income tax rate of 45% and an effective Capital Gains Tax rate of 36%, which can severely reduce the distribution's net value. 

Trust-to-Trust transfers 
In complex estate structures, families often attempt to distribute capital from a local trust directly to an offshore trust. While the SARB has relaxed certain regulations to permit this, the compliance environment remains rigid. The offshore trust must be explicitly named as a beneficiary in the local trust deed for the transfer to be considered. Furthermore, the SARB will closely scrutinise the ultimate beneficial owners of both trusts, and the approval review process can take up to eight weeks. At present, only cash may be distributed from a local trust to an offshore trust. Any income or realised capital gains forming part of the distribution will be taxed as stated above.

For South Africans with global footprints, proactive estate planning is non-negotiable. Beneficiaries living abroad who lack South African identity documents, active tax numbers, or formal emigration records will experience severe delays in receiving their inheritances. Testators must work closely with fiduciary experts to ensure their local assets can be efficiently liquidated and transferred to their global heirs without falling foul of SARB or SARS regulations.