South African individuals may, inter alia, transfer funds out of South Africa in terms of current Exchange Control Regulations either via their Single Discretionary Allowance (SDA) or their Foreign Investment Allowance (FIA).
Resident – means any person who has taken up permanent residence and/or is domiciled in South Africa.
Calendar year – This is the period that the allowances fall within, i.e. the allowances reset every year on the 1st January and can be used up until 31 December. Should you use your full allowance within the period then you will need to wait until the new year for further allowances to be available.
Single Discretionary Allowance - R1 Million
The single discretionary allowance (SDA) allows you to transfer up to R1 million without a tax clearance certificate for any legal purpose, including investment offshore of South Africa. It may be utilised solely at the discretion of the resident. If the allowance is used for travel purposes, then the relevant travel documents need to be provided to the authorised dealer before the provision of funds.
It should be noted that a valid green bar-coded South African identity document or a Smart identity document card needs to be presented to the Bank and is the only acceptable document proving residency in South Africa.
Foreign Investment Allowance (FIA)
In addition to your single discretionary allowance (SDA), every South African resident, 18 years and older is also entitled to a foreign investment allowance (FIA) of up to R10 million per calendar year.
This can be used primarily for investment offshore and is in addition to the SDA of R1Million.
However, funds cannot be transferred to another South African resident abroad without prior consent from the SARB and you may not enter into commitments offshore which would result in recourse to South Africa.
As in the case of the SDA a valid green bar-coded South African identity document or a Smart identity document card needs to be presented to the Bank and is the only acceptable document proving residency in South Africa.
Unlike your SDA your FIA is also subject to obtaining a Tax Compliance Status (TCS PIN Letter) from SARS verifying your tax compliance status.
In addition, foreign currency accounts may be opened for private individuals (natural persons) to accommodate the FIA and Authorised Dealers (Banks) may allow withdrawals from these accounts through the use of any authorised banking product. Funds withdrawn from these accounts may also be converted to Rand.
Should a resident wish to transfer an amount larger than R10 Million, for investment purposes, then they will need to apply to SARB for approval.
Forward Exchange Contracts
Individuals have the ability through an Authorised Dealer to establish a forward exchange contract (FEC). This allows clients to secure a foreign value for a future date at a forward calculated exchange rate. This is ideal for hedging against future Rand weakness or strength depending on the direction of the funds. Depending on the financial institution you will be required to deposit a percentage of the value into an account as collateral to secure the FEC, usually between 10%-15%.
This is ideal for hedging against future Rand weakness or strength depending on the direction of the funds. Depending on the financial institution you will be required to deposit a percentage of the value into an account as collateral to secure the FEC, usually between 10%-15%.
The Authorised Dealer will also need you to provide them with relevant FICA (KYC) documentation, to support the foreign exchange transactions to be undertaken on your behalf, if not already in their possession.
Should you wish to use your remaining SDA or FIA before the end of the calendar year, or you would like to secure an exchange rate for a future transfer through establishing an FEC, then speak to one of our specialists at Beztforex who will assist you with your transaction.
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Author: Warren Tagg | Eastern Cape Franchise Owner