Foreign Investment Allowance
With everyone and their cousin twice-removed emigrating to Australia together with the expansion of local businesses overseas, it has become an everyday occurrence for South African’s to either have assets overseas or for South Africans to make financial investments overseas.
Why a person may do so varies – perhaps they are purchasing assets whilst living temporarily abroad, maybe they’re using their various South African Reserve Bank allowances or perhaps they feel like making an investment overseas. It happens.
But the reason we want to invest overseas, or purchase assets overseas is in truth irrelevant. How we go about doing so is.
The South African Reserve Bank (SARB) is the captain of this foreign allowance boat, and it regulates, and controls various allowances related to foreign exchange and financial transactions in South Africa.
These transactions include –
Single Discretionary Allowance:
South African residents over the age of 18 – and in possession of a valid green bar-coded South African identity document or smart identity document card – can take advantage of a Single Discretionary Allowance.
This allowance allows for a limited amount of funds to be sent abroad for a number of legitimate purposes (including for investment purposes abroad as well as the sending of gift parcels in lieu of cash excluding gold and jewellery), such as travel forex, gifts, and others.
This allowance is R1 million per calendar year.
According to SARB –
“The single discretionary allowance may be used for any legal purpose abroad (including for investment). It may be utilised solely at the discretion of the resident, without a requirement for the resident to produce documentary evidence relating to the funds to be transferred to the Authorised Dealer, except for travel outside the Common Monetary Area (eSwatini, Lesotho, Namibia, and South Africa). If the allowance is used for travel, a passenger ticket needs to be produced”.
While we have set out two requirements i.e. over 18 with an identity document, there are some other rules that prevail over this transaction, which according to SARB are as follows –
- “Adult residents (above 18 years old) may use a travel allowance within the single discretionary allowance limit of R1 million per calendar year.
- Residents under 18 years old are permitted a travel allowance of up to R200 000 per calendar year.
- Foreign exchange, in terms of a travel allowance, may be provided in any authorised form. The travel allowance may also be transferred abroad to the traveller’s own bank account, but not to a third party’s account.
- Foreign currency for travel may not be bought more than 60 days prior to the departure of the traveller.
- Travellers may not use the foreign currency they purchase for any purpose other than stated or declared upon purchase.
- Travellers must convert unused foreign exchange to rand within 30 days of returning to South Africa.
- If a travel allowance was partly used, i.e., not all the funds were spent on holiday, the traveller is not permitted to keep the funds offshore or use them to buy offshore assets.
- The cost of land arrangements (such as hotels, cruises, and tours) forms part of the travel allowance, but local payment of airfares does not.
- A South African Revenue Service (SARS) customs declaration may be required for any goods taken outside South Africa. If the insured value of the item exceeds R200 000, prior written approval from the Financial Surveillance Department through an Authorised Dealer is required. If the items exported will not be returned to South Africa and their insurance value exceeds R50 000, an application must be submitted to the Financial Surveillance Department through an Authorised Dealer.
- Travellers may also take cash (rand notes) up to the value of R25 000 per person”.
Foreign Capital Allowance:
South African residents or South African citizens living abroad who have not yet formally emigrated are typically allowed to invest up to R10 million per calendar year abroad.
This allowance is subject to certain requirements and documentation.
According to the Currency and Exchange Guidelines for Individuals (dated 13/10/2023), a foreign capital allowance –
“may be availed of through an Authorised Dealer*, which may be transferred to a foreign currency account with a local Authorised Dealer or invested abroad, within a limit of R10 million per calendar year per individual, subject to a TCS PIN verifying the taxpayer’s tax compliance status and green bar-coded South African identity document or Smart identity document card and is 18 years and older.
3.6.2 The funds to be transferred must be converted to foreign currency by an Authorised Dealer.
3.6.3 The Financial Surveillance Department will consider applications by private individuals via an Authorised Dealer to invest in different asset classes offshore in addition to the abovementioned allowance. Private individuals wishing to avail of this dispensation must first approach SARS to obtain a TCS PIN verifying their tax compliance status report, which must accompany their application to the Financial Surveillance Department for consideration”.
- * An authorised dealer is a person or institution authorised to deal in gold or likewise authorised to deal in foreign exchange transactions – authorised by the Treasury.
Special Clearance Allowance –
Kuda FX can assist client’s who wish to make further investments by applying for a Letter of Compliance from SARS. This will apply in the event that you wish to exceed the R11 million amount that’s made up of the single discretionary allowance and the foreign capital allowance per calendar year.
Once the letter has been issued, the next step is to obtain SARB approval for the same thing.
SARS and SARB review each application on its own merits. There is no limit to the application amount for the special clearance. Kuda FX can facilitate the full process of the special clearance approvals.
** Reminder – as we head towards the end of the 2023, be sure to use your foreign capital allowances. In this regard, we encourage you to contact Kuda FX to discover how we can be of assistance **
If you have any queries on the information we have set out above, please feel free to get in touch with us.
We cannot wait to help you with all your forex needs!
