Non-Executive Directors who are non-resident for South African tax purposes are increasingly experiencing delays and uncertainty when seeking to remit directors’ fees offshore. This follows recent regulatory amendments published by the South African Reserve Bank (SARB), which formally position the South African Revenue Service (SARS) as the primary compliance gatekeeper for the externalisation of income.
Bronwin Richards
Senior Tax Attorney
Non-Executive Directors who are non-resident for South African tax purposes are increasingly experiencing delays and uncertainty when seeking to remit directors’ fees offshore. This follows recent regulatory amendments published by the South African Reserve Bank (SARB), which formally position the South African Revenue Service (SARS) as the primary compliance gatekeeper for the externalisation of income.
Bronwin Richards
Senior Tax Attorney
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The consequences are significant. Directors’ fees may no longer be transferred offshore unless both SARS tax compliance requirements and exchange control conditions are satisfied, and in the prescribed sequence.
Reports are already emerging of directors’ fees being held locally pending SARS approval, delaying remittances by six weeks or longer.
For directors remunerated on a quarterly basis, the new regime introduces practical and operational constraints, necessitating proactive planning.
Directors’ Fees Are Now Explicitly Regulated
Going forward, Directors’ fees are treated as a distinct, fully regulated category of outward payment, and may only be transferred offshore once both SARS tax compliance and exchange control requirements are satisfied.
Following representations by Authorised Dealers, SARS and other market participants, Section B.3(B)(iii) of the Authorised Dealer Manual was amended, making it explicit: any offshore transfer of directors’ fees to non-residents – or individuals who have ceased to be South African tax residents – cannot proceed without formal SARS approval.
Authorised Dealers may process the offshore transfer of directors’ fees only where:
This removes any uncertainty as to whether directors’ fees may be treated informally or grouped with other income streams. They are now recognised as a distinct category of regulated outward payment.
What Non-Resident Directors Need to Know
Before any directors’ fees may be remitted, SARS must confirm the director’s tax compliance status. The approval required depends on whether the director remains registered on eFiling.
Where the Director is registered with SARS:
A Tax Compliance Status – Approval for International Transfer (AIT) PIN must be obtained. The AIT process was introduced by SARS in April 2023 and has now been fully aligned with the exchange control framework governing income payments to non-residents, including directors’ fees.
Where the Director is not registered with SARS:
A Manual Letter of Compliance – International Transfer (MLC) must be obtained from SARS.
In both cases, the underlying principle is the same: Authorised Dealers may not release funds unless SARS has confirmed tax compliance. This can potentially create a bottleneck and delay or disrupt the timing of directors’ fee payments.
Timing Traps for Quarterly Payments
For Non-Executive Directors who externalise fees quarterly, the new rules introduce practical and operational constraints that should not be underestimated. In practice, an AIT PIN can take longer than six weeks to obtain. SARS generally requires proof of available liquid funds before issuing approval, limiting the ability to apply in advance of payment.
It remains unclear whether SARS will permit a single approval to cover multiple payments or whether a new PIN will be required per remittance. Different banks may also adopt different internal interpretations when implementing the rules. As a result, directors may find that their fees are not immediately transferable, purely due to procedural timing rather than any substantive non-compliance.
As a result, Non-Executive Directors are already starting to see their directors’ fees held locally pending SARS approval, delaying scheduled remittances. Given the current uncertainty around how these rules will be applied, early engagement with an expert is critical.
Navigating the New Reality
In this heightened regulatory environment, proactive planning is essential. In practice, this involves assessing whether an AIT PIN or MLC is required in each instance, managing SARS applications strategically and liaising with Authorised Dealers to facilitate compliant offshore remittance of directors’ fees.
For a non-resident Non-Executive Director who externalises fees quarterly, or companies paying directors’ fees offshore, a pre-payment review is critical. Engaging proactively with tax and exchange control specialists is the most effective way to ensure that directors’ fees are remitted smoothly, compliantly, and without unnecessary disruption.
In short: the days of casual offshore payments are over. SARS is now in control, and missing a step can mean your directors’ fees do not leave South Africa on time.
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