Towards the end of 2024 the South African Reserve Bank (“SARB”) issued a final circular, which included some good news for South African resident entities. Most notably, South African resident entities no longer need prior approval from the Financial Surveillance Department to send royalties and fees to related parties outside of South Africa. These royalties and fees include the following: 

• payments for services rendered by non-residents, including associated costs such as airfares and accommodation; 
• minimum, advance and down payments, provided they are recoupable from future royalties or fees; and 
• percentage-based fees, if normal in the trade concerned. 

Although prior approval is not required in the above-mentioned cases, an applicant entity must still comply with the following conditions:  

• senior management of the applicant entity must provide the Authorised Dealer with written confirmation that transfer pricing documentation is being maintained as prescribed by the South African Revenue Service; 
• senior management of the applicant entity must provide the Authorised Dealer with written confirmation that the transaction was concluded at fair and market related prices in respect of ad hoc services rendered between the related Parties; and 
• where the applicant entity has made recurring payments in terms of a royalty agreement, the applicant entity must, on an annual basis, present a letter from their independent auditor in respect of the royalty payments.  

Further to the above, the final circular states that payments for invoices older than twelve (12) months are allowed if no interest is charged, and where applicable, minimum, advance and down payments are also permissible, provided that such payments are normal in the trade concerned. 

This final circular marks a welcome step towards easing regulatory requirements for South African resident entities engaging in cross-border transactions with related parties. By removing the need for prior approval whilst maintaining key compliance measures, the South African Reserve Bank has provided businesses with greater flexibility and efficiency in managing their international obligations. However, it remains crucial for entities to adhere to the prescribed documentation and reporting requirements to ensure compliance with transfer pricing regulations. This development underscores a balanced approach by the SARB—facilitating trade while upholding transparency and regulatory oversight.