SA Trust Distribution to Offshore Beneficiaries: Compliance Essentials

Distributing funds from a South African trust to offshore beneficiaries involves a number of regulatory and tax considerations. These distributions must comply with the trust deed and meet all tax and exchange control requirements. Below, we outline the key steps and scenarios to help trustees and beneficiaries navigate the process with confidence.

Cross-Border Compliance Essentials

Before any funds are distributed, the trust must:

• Be a South African resident trust
• Be fully tax compliant
• Show that all tax obligations related to the distribution have been or will be settled

Trustees must also ensure the required documentation is in place to satisfy both SARS (South African Revenue Service) and SARB (South African Reserve Bank).

Scenario 1: South African Tax Resident Temporarily Abroad

If the beneficiary is still a South African tax resident (but temporarily living overseas):

• Funds must be paid into their SA resident bank account
• The beneficiary may then transfer the money offshore using their:
  • Single Discretionary Allowance (up to R1 million/year), or
  • Foreign Investment Allowance (up to R10 million/year, with SARS approval)
• A bar-coded SA ID is required

This option is often used by expats who have not concluded formal tax emigration but are living overseas for extended periods.

Scenario 2: South African Citizen Who Has Concluded Tax Emigration

For beneficiaries who have formally concluded tax emigration with SARS:

• The distribution must be made to an ‘Emigrant’ bank account in South Africa.
• The following documentation is required:
  • Proof of tax emigration (confirmation from SARS).
  • Approval for International Transfer (AIT) from SARS.
  • A foreign passport and proof of foreign residence.

These documents enable the conversion and remittance of funds from South Africa to the beneficiary’s offshore account.

Scenario 3: Bona Fide Non-Resident Beneficiary

A Bona Fide Non-Resident is an individual who:

• Lives permanently outside South Africa,
• Has no employment, residential, or financial ties to South Africa.

In this case:

• The trust can distribute the funds into a non-resident account in South Africa opened in the beneficiary’s name.
• Once exchange control approval is granted, funds can be sent offshore

Required Documentation

• Trust Deed
• Trustee Resolution
• Master’s Letter of Authority
• Trust’s Financial Statements
• Beneficiary’s foreign passport and proof of residence
• Bank statements reflecting the flow of funds

Direct Offshore Payment via Inter Vivos Trusts

In some cases, Inter Vivos Trusts can pay non-resident beneficiaries directly offshore by opening a local bank account in the name of the trust. This account is used to process the foreign transfer, and all the standard compliance documents are still required.

Note: For an Inter Vivos Trust, a SARB approval is required. 

Ensure Your Trust Distributions Are Compliant

Managing offshore distributions from South African trusts requires careful handling of legal, tax, and exchange control rules. Whether you’re a trustee or beneficiary, expert support can help you avoid delays and ensure full compliance.

If you need assistance with a Trust Distribution, contact Currency Partners today. We’ll help you manage the process from documentation to disbursement, ensuring peace of mind every step of the way.

For more information or assistance please email enquiries@currencypartners.co.za or call (+27) 21 203 0081 to get in touch with our expert team.