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Using your foreign investment allowance – what you need to know and documentation required

By April 19, 2021August 25th, 2023Forex

Using your foreign investment allowance – what you need to know and documentation required

April 19, 2021


If you’re a South African living abroad, and you haven’t formalised your emigration or wrapped up your financial affairs back home, you’re entitled to use your Foreign Investment Allowance to transfer abroad up to R10 million per calendar year. There are certain paperwork and supporting documentation requirements that need to be met from a tax verification purpose when utilising this foreign exchange allowance as an individual, so let’s take a look at exactly what’s involved.


Quick recap. What is the foreign investment allowance?

The Foreign Investment Allowance is one of two mechanisms by which South African tax residents can transfer money out of the Republic, the other being the Single Discretionary Allowance in terms of which it is possible to move up to R1 million abroad without prior tax clearance, as long as the individual is in good standing with the South African Revenue Service (SARS).


You’ll need to meet the following requirements: how to apply for the foreign investment allowance through SARS

  • Obtain a foreign investment tax clearance certificate from the South African Revenue Service (SARS). This means you’ll need to be a taxpayer in good standing, over 18 years of age.
  • Decide on the exact amount to be transferred, which must reflect on your tax clearance certificate. You’ll need to give this clearance to the Authorised Dealer facilitating your transfer.
  • Bear in mind that it is valid for only 12 months and the amount mentioned in the tax clearance certificate cannot be deviated from.
  • Obtain a tax compliance status later that contains your tax reference number and unique PIN, which will be used to verify your tax status before your Authorised Dealer carries out your transfer.


Some things to note about using your foreign investment allowance

  • Funds moved abroad cannot be re-introduced into the Republic as a loan to a Common Monetary Area resident.
  • You are not permitted to engage in any transactions that involve the export of capital from South Africa, whether directly or indirectly.
  • When applying to use this allowance, expert understanding of the processes and paperwork involved can ensure that all the necessary supporting documentation is in order so that your application is processed without delay.


What supporting documentation is required to use the foreign investment allowance?

Along with your application for a Tax Compliance Status (TCS) to use the foreign investment allowance as an individual, get ready to furnish the following supporting documents:

  1. Relevant material that shows the source of your capital that is to be invested. 
  2. A statement of your assets and liabilities for the previous three tax years (that discloses all investments, loan accounts, and distributions you’ve received from local and foreign companies, trusts, etc.)
  3. The necessary Power of Attorney declaration where the TCS application is submitted on your behalf.


What supporting documents are required? It all depends on the source of the capital to be invested

When you apply for a Tax Compliance Status (TCS) in respect of foreign investment allowance for individuals, you are required to submit the following documents in relation to source of capital.

LOAN Where a parent lends money to a child to invest offshore: Loan agreement; andParent’s bank statement not older than three months. Where a trust lends money to a trustee or beneficiary to invest offshore: Loan agreement;Bank statement of trustee or beneficiary not older than three months;Most recent Trust Financials;Three months’ bank statements for trust not older than three months; orTrust’s latest share portfolio statement (not older than three months) to reflect the amount of shares and their current market value. Where a company lends money to a director of the company to invest offshore: Loan agreement between the company and the director;Bank statement of the director, not older than 3 months; andCompany’s latest annual financial statements.
DONATION Where the donation is between spouses: An IT44  declaration; andDonee’s bank statements, not older than three months Where the donation is not between spouses: An IT44 declaration Proof (Copy of the receipt) of donations tax paid; andBank statement of donor and donee, not older than three months.
INHERITANCE Letter from the executor of the estate;A copy of the Liquidation & Distribution account; andBank statement, not older than three months.
SAVINGS/CASH/BANK ACCOUNT/FIXED DEPOSITS: Bank statement, not older than three months; andProof of source (detailing where and how you obtained the money).
SALE OF SHARES Portfolio statement not older than three months, to reflect the amount of shares and current market value.
INVESTMENT INCOME – LOCAL AND FOREIGN Schedules of the interest/dividends received, indicating the source and amount of interest/dividends.
TRANSFER OF LISTED SECURITIES Details of any locally-listed securities that you intend to move to an exchange that is outside South Africa.​
SALE OF PROPERTY ​Original Conveyancer’s letter to confirm the property transfer and that the money will be transferred from the trust account; or​​Proof of receipt of the proceeds together with applicant’s bank statement not older than three months.
ROYALTY INCOME Source of royalty income; andProof of royalty payment.
EARNINGS Where you have recurring foreign investments not more than R30 000 annually, a copy of a salary slip is needed once a year: The policy number; and The institution (e.g. Sanlam / Old Mutual) must apply on behalf of the taxpayer. Where income is from any entity, local or foreign, in which you holds a direct or indirect beneficial interest: The nature of relationship with the entityProof of amounts/distribution received If owner of any businesses, the company group structure, profile and other group investments.If a director of company or member of a Close Corporation is a shareholder, a shareholder’s agreement and share incentive scheme agreement.
DISTRIBUTIONS FROM A TRUST Resolutions from the Trust making the distributions;Details of the source from the Trust making the distribution;Bank statement of Trust, not older than three months; orTrust’s latest share portfolio statement (not older than three months); this statement will also include the amount of shares and current market value.
OTHER Documentary proof and explanation.


FinGlobal: reputable financial services for South African expats

Getting your ducks in a row to utilise your Foreign investment allowance to move money abroad? We’re ready to help you make it a smooth, hassle-free process. We handle every step on your behalf, ensuring the paperwork is properly handled and supporting documentation is complete, making the application for tax clearance to SARS on your behalf. Once your tax status has been verified, we’re ready to make your money transfer happen quickly and conveniently, and at much lower exchange rates than commercial banks. 

To see how FinGlobal can make your money moves happen, leave your contact details and we’ll be in touch to discuss your requirements. 

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