Travel allowances to ‘leisure’ travellers and ‘Omnibus’ travel facilities to business travellers
You are a South African resident wishing to travel overseas for business or leisure and not sure what foreign currency you are entitled to avail of, in order to meet your related costs.
This commentary covers Financial Surveillance (Exchange Control) conditions applicable to general holiday travel by South African residents, as well as Business travel undertaken by representatives of South African companies. We trust the information provided will offer a useful level of guidance.
Travel Allowances to Leisure Travellers
When offering guidance on the provision of travel allowances to South African individuals, as well as the payment of related ‘Land Arrangements’ to offshore parties, it is always advisable to initially refer to the Single Discretionary Allowance (SDA) ‘concession’ which is available to South African Residents. It is therefore appropriate to highlight some ‘key’ features of the Single Discretionary Allowance, before focussing on requirements pertaining to the issue of travel allowances:
(i) Residents (natural persons) who are 18 years and older may be permitted to avail of a single discretionary allowance within an overall limit of R 1 million per individual per
calendar year without the requirement to obtain a TCS PIN letter from SARS. This
allowance may be used for any legal purpose abroad (including for investment purposes
as well as the sending of gift parcels in lieu of cash excluding gold and jewellery).
(ii) This dispensation can be utilised solely at the discretion of the resident without
presenting any documentary evidence to the remitting Banker, except for travel
purposes outside the CMA, where a passenger ticket needs to be produced.
(iii) The single discretionary allowance may be transferred abroad in Rand, however,
transfers of a capital nature must be converted to foreign currency through an
Authorised Dealer (Bank).
(iv) The resident individual must produce a valid green bar-coded South African identity
document or Smart identity document card for identification purposes
(v) Individuals, who are under the age of 18 years may not use the single discretionary
allowance but may obtain a travel allowance not exceeding an amount of R200 000 per
calendar year.
One of the ‘legal purposes’ which the R 1 Million SDA may be used for is the provision of a ‘travel allowance’ to parties who are 18 years and older. It is of course incumbent upon anyone using this allowance to ensure that they do not exceed the applicable limit. A travel allowance is specific to costs or expenses relating to international travel, outside the Common Monetary Area (CMA), being Lesotho, Namibia and eSwatini.
Foreign currency may be obtained in any authorised form including foreign currency notes. Credit and/or Debit cards may also be used to meet related offshore expenses. The travel allowance may also be transferred abroad to the traveller’s own bank account and/or spouse accounts, but not to the account of a third party. Minors travelling with parents, may have their travel allowances transferred to their parents’ bank account offshore.
In addition, up to R25 000 in cash, per person, may be taken when proceeding on visits outside the CMA, to meet travellers’ immediate needs on return to South Africa
Generally speaking, a travel allowance will be used to meet the typical expenses of a leisure traveller, whilst on holiday overseas and it follows that the R 1 Million per annum allowance must be used to meet the cost of related ‘Land Arrangements’. Land Arrangements refer to expenses such as foreign tours, hotel accommodation and vehicle rental, which are normally made at the request of travel agents or tour operators.
South African travel agents and tour operators who need to make advance payments or payments in full in respect of independent or package tours offered to the general public must produce documentary evidence to the paying Bank, in the form of an invoice or pro forma invoice from the foreign payee confirming the amount payable. We understand that a facsimile copy of an overseas invoice plus a covering invoice issued by the local travel agent/ tour operator may be regarded as acceptable, to support the transfer of these types of funds abroad. These payments will of course need to be deducted from the individuals R 1 Million Annual Allowance.
However individuals who are not using the services of a travel agent or tour operator, to pay for their ‘Land Arrangements’ may be allowed to make advance payments or payments in full in respect of, tours, hotel accommodation, vehicle rental and to cover the cost of admission to drama, music, religious and other similar festivals and sports events, as well as the cost of passenger tickets for travel between destinations outside of South Africa, provided that detailed documentary evidence from the foreign counterparty is submitted to the paying Banker, in support of the request to transfer funds. Similarly, these costs are deductible from the R 1 Million annual allowance.
It is also important to note that the actual cost of a passenger ticket for international travel, eg an air ticket or bus ticket may be paid locally to South African service providers in Rand, without any deduction from the R 1 Million SDA limit. In the normal course therefore, foreign currency travel facilities may only be provided to persons who have been issued with passenger tickets in their names in South Africa for journeys commencing from South Africa. It follows that no passenger ticket may be issued locally against payment in Rand for utilisation by a traveller whose journey does not commence from the CMA.
Following on from the aforementioned, it is nonetheless worth commenting that where a traveller commenced a journey from South Africa, they will be allowed to pay further amounts in Rand without any deduction from the travel allowance, in respect of any additional cost for an extension or alteration to the journey, provided that the relative additional and/or alternative ticket is issued in South Africa by either an airline office or a travel agent acting on behalf of an airline who has ownership of the original passenger ticket, or an overseas agent or representative office abroad of a ticket issuer in South Africa, against a prepaid ticket advice arranged through a ticket issuer in South Africa in conjunction with the original passenger ticket.
It is also important to recognise that the previously mentioned payment processes for passenger tickets may not be regarded as being applicable to any arrangements where hotel accommodation and meals, overland, lake and river transportation and sightseeing tours are included in the price of the ticket. Equally the cost of an overseas cruise on a cruise ship may specifically not be paid in Rand without any deduction from a travel allowance, unless the prior written approval of the SA Reserve Bank, Financial Surveillance Department has been obtained.
Please note however that Residents embarking on coastal cruises in South African territorial waters and ‘cruises to nowhere’ may be issued with foreign currency within the single discretionary allowance limit of R 1 million per calendar year.
As an exception to arrangements mentioned above, where a local traveller is in possession of a passenger ticket which has been purchased by a non-resident and issued abroad, Authorised Dealers (Banks) are permitted to issue foreign currency within the single discretionary allowance limit of R 1 million.
Slightly different arrangements apply to overland travellers commencing their journey from South Africa, as passengers on charter flights, persons flying private aircraft and persons sailing on private yachts. In these circumstances no passenger tickets would be available. Provided Banks are satisfied with the intended travel arrangements, they can still issue foreign currency within the single discretionary allowance of R 1 million to such travellers.
When making use of their SDA in respect of a travel allowance, prospective travellers must provide the Bank with a written undertaking that they will:
travel within 60 days from the date of the request for foreign currency;
not purchase foreign currency from an AD in excess of the applicable limits;
will offer for resale all foreign currency that they received in the event of the trip being cancelled, to a Bank or an ADLA (authorised dealer in foreign exchange with limited authority, such as Bureaux de Change); and
will offer for resale to a Bank or ADLA any unused foreign currency within 30 days of returning to South Africa.
South African residents availing of travel allowances should therefore be aware that any amounts taken or transferred abroad for purposes of travel may not be used for any other purpose, in terms of the requirements of Exchange Control Regulation 2(4). Once a person has returned to South Africa from overseas travel, they must resell any remaining foreign currency to a Bank or ADLA within 30 days, in terms of Exchange Control Regulation 2(5).
To all intents and purposes, this means that if a person travels abroad with his family and has a foreign bank account, he may not deposit any unused portion of his travel allowance or any of his family members’ travel allowances into his foreign bank account and use it for investment purposes.
It is worth a mention that in cases where a traveller’s overseas visit extends from the current year into the following year, they may be accorded foreign currency in respect of the next year’s facilities without returning to South Africa.
Residents proceeding abroad temporarily for reasons other than business or holiday travel may be granted a travel allowance within the single discretionary allowance limit of R 1 million per calendar year.
Residents who are proceeding abroad for study purposes as well as an accompanying spouse both qualify for an allowance within the single discretionary allowance limit of R 1 million.
Residents of Lesotho, Namibia and eSwatini do not qualify to be accorded a travel allowance in South Africa. However, limited amounts of currency may be provided locally in respect of certain specific exceptions, i.e. foreign diplomats, accredited diplomatic staff and students with a valid student card.
So, In summary:
Adult residents (above 18 years old) may use a travel allowance within the single discretionary allowance limit of R 1 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 to local service providers 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 (Bank) 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.
Omnibus Business Travel Facilities
In many instances local Business enterprises find the need for certain employees to make business trips overseas, often on a fairly regular basis. To streamline the processes surrounding the provision of foreign currency to meet the offshore expenditure requirements of these business travellers, the South African Reserve Bank enabled Authorised Dealers (Banks) to formally approve applications by entities, for what is known as an omnibus travel facility. The Banks have discretion to approve up to R 20 million per calendar year for allocation to the entities’ representatives for business travel purposes only, at the discretion of the relevant entity.
On an annual basis however, a business does need to make an application in writing to their banker to be allowed to avail of this ‘Omnibus’ facility. At that time, the business would be expected to volunteer the following background information:
(a) the total amount applied for in respect of the calendar year
(b) confirmation that the amount applied for is reasonable in relation to the business activities of the entity concerned
(c) details of the purpose that the omnibus travel facility will be used for
(d) the envisaged number of trips during the calendar year
(e) the names, surnames and identity numbers of the administrative employees that are authorised by the entity to deal with the Authorised Dealer
(f) the CIV documentation of the administrative employees that are authorised by the entity to deal with the Authorised Dealer; and
(g) the CIV documentation of the entity.
Please note that CIV documentation means client identification and verification documentation in terms of section 21 of the Financial Intelligence Centre Act, 2001 (Act No. 38 of 2001)
Each time that a representative of the entity needs to travel, during the calendar year, the Bank selling the currency must view an official letter from the business concerned, authorising the proposed business trip and explaining the purpose of the trip/s. The Bank will also ask for the passenger ticket and passport of the prospective traveller(s), before issuing the requested currency.
It is important to note that an omnibus travel facility may only be used for business travel purposes and may not be deposited into any foreign bank account or be used to acquire goods and/or services abroad.
Furthermore, it is also worth noting that representatives of businesses availing of an omnibus travel facility also qualify in their personal capacity for a travel allowance within the single discretionary allowance limit of R 1 million per calendar year.
Please note that should your business require a facility in excess of R 20 million per calendar year, a detailed application must be submitted to the South African Reserve Bank Financial Surveillance Department, for consideration.
As a general comment, exemption from the applicable Exchange Control Regulations for retention of foreign currency will be granted to business travellers going abroad on recurring business trips. Where the next business trip is to occur within 90 days from returning from a previous business trip, any unutilised foreign currency may be retained by the traveller for use during the next business trip.
BeztForex is well positioned to provide any further guidance on the matters raised in this commentary, including the preparation of any necessary applications to SA Reserve Bank and in conjunction with our Partner Banks we can also assist with the sourcing of foreign currency (cash and card) solutions, if required.
Please get in touch with us, should you require assistance.