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Understanding your offshore allowance

As a South African resident, you are subject to certain exchange control regulations.
Image: Shutterstock

With an economy in the doldrums, South Africans are increasingly looking to make use of business and investment opportunities offshore. However, it’s important to note that as a South African resident, you are subject to certain exchange control regulations. And while these regulations have eased over the past few years, it’s crucial to understand the regulations at play in order to avoid landing in hot water with the South African Reserve Bank (SARB).

First, it’s important to understand what is meant by “South African resident”. This refers to a resident for exchange control purposes, and differs from SARS’ definition of a tax resident in that it refers to any person (or a natural person or legal entity) that has taken up permanent residence, or is registered in South Africa.

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Next, it’s important to note that all funds paid from or to South Africa needs to be reported through the balance of payments (BoP) reporting system by an authorised dealer, or foreign exchange provider. However, you don’t have to approach a bank directly for these payments; you can also make use of a treasury outsource company, which may assist in obtaining beneficial exchange rates for more cost-effective transactions.

For individuals, there are essentially two main dispensations or two types of offshore allowances at your disposal. These are a single discretionary allowance, and a foreign investment allowance.

Single discretionary allowance (SDA)

Every South African resident over the age of 18 years is entitled to a single discretionary allowance (SDA) of up to R1 million per calendar year.

This allowance can be used for any legitimate purpose at your own discretion, including gifts to friends or family living abroad, making online purchases of goods denominated or sold in a foreign currency, or investing in offshore investments.

To make use of your single discretionary allowance, all you need is a valid green bar-coded South African identity document or smart identity card. You will not have to produce any documentary evidence to your authorised dealer, except if you are making use of your allowance for travel purposes. If you are making use of your allowance for travel, you will need to provide certain mandatory documentation, which your foreign exchange provider should be able to offer guidance on.

Foreign investment allowance (FIA)

In addition to your single discretionary allowance, every South African resident over the age of 18 years is also entitled to a foreign investment allowance (FIA) of up to R10 million per calendar year.

This can be used to purchase property in foreign countries, invest amounts exceeding R1 million, and for transfers for other purposes where you may have already exceeded you R1 million SDA.

However, when transferring funds abroad, it’s important to note that the externalised amount is not allowed to materialise in the hands of another South African resident. In other words, you cannot transfer funds to another South African resident abroad without prior consent from the SARB.

Additionally, unlike your SDA, your FIA comes with additional restrictions. For instance, the use of your FIA is subject to obtaining a tax clearance certificate PIN verifying your tax compliance status, green bar-coded South African identity document or smart ID card, and verifying that you are over the age of 18 years.

Exceeding your allowance

 If you wish to transfer funds in excess of your SDA and FIA abroad, or above the value of R11 million within a calendar year, you can apply to the SARB for permission via your authorised dealer.

You will then need to supply a motivational letter to your authorised dealer which details:

  • The value of the application, or amount you would like to transfer;
  • A supporting tax clearance certificate;
  • Details regarding the investment;
  • The reason for the investment.

Should you have any questions or concerns regarding foreign exchange transactions or moving money in and out of South Africa, seek the advice of qualified, professional foreign exchange experts. By utilising a professional treasury company, you will also receive assistance with all the necessary administration required, including instruction, settlements, compliance and reporting, saving you valuable time and ensuring you peace of mind.

Bianca Botes, Director, Citadel Global

COMMENTS   14

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Thank you for explaining.

If one takes funds out under FIA and brings funds back in in a single year is the net amount ones FIA or is only the exiting funds part of the FIA

You are “credited” with the funds remitted to SA, although this must be done through the correct channels – SWIFT transfer to your local bank, proper completion of the BOP form.
You can then remit these introduced funds, above your annual FIA.

Exchange control says everything about a countries confidence in itself as an investment destination. Switzerland doesn’t need it-nor does the Netherlands, UK or other civilized law abiding destinations.

Its a relic from the apartheid era vigorously enforced by the ANC out of fear that the country is drained of all resources

Harder to steal it if the owners of capital ship it offshore

The (sponsored) article states ‘You will not have to produce any documentary evidence to your authorised dealer, except if you are making use of your allowance for travel purposes.’

I’m not sure that this is the full picture.
– Many (most?) individuals travel and use their debit or credit cards to draw foreign currency notes from overseas ATMs or pay for some expenses overseas using these cards without being required to produce any documentation before or after their trip. Products like Standard Bank’s Shyft do not differentiate between foreign currency purchased and pre-loaded for travel or non-travel purposes.
– The need to produce documentary evidence such as air tickets seems to apply only when you purchase actual foreign currency notes for travel purposes from your AD.

It would be useful if an expert can clarify.

When I dealt with forex exchange (+30 years ago) it was mandatory that you had to stipulate how much you were going to spend on cards whilst overseas and this amount was endorsed in your passport

If you are purchasing cash and utilizing your travel allowance to do so, then you would need to provide proof of travel. It is much easier to just use SHYFT and then use the respective currency debit card – as you can trade when you like, as opposed to 90 days prior to travel.

What this article doesn’t cover is the onus on the person or company to return the funds at a future date – travel allowances not utilized is required to be returned to the authorized dealer within 1 year of exiting the country. Also some countries will not allow SA passport holders to purchase property in their countries – France specifically

Never heard of this and in fact personally know quite a number of South Africans (not dual citizen holders), who own property in France. Boussac is overrun with them. They even get 5 year visums.

You can definitely buy property overseas, France included, as an SA citizen / resident.

Don’t know where you got that info.

Pray elucidate me as I have been trying to purchase a property in Orne for the last 5 years and have had no joy. One avenue does seem to be via a heritage passport if you have near relations of British descent.

Show me the way – or are you mistaken

If you made a R1m gift to friends or family overseas, there’d presumably be donations tax payable?

Article does not have much substance. Sorry!

End of comments.

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