New year, new you? Forget it. This is even better than short-lived resolutions. A new calendar year means that offshore transfer allowances have reset, allowing South Africans to use their single discretionary allowance (SDA) and foreign capital allowance (FCA) (previously referred to as the foreign investment allowance or FIA) to transfer offshore a cumulative amount of R11 million in 2023. So what are these offshore transfer allowances, who can use them and how do they work? Let’s take a look at answering these questions so you can get started on moving your money out of South Africa, efficiently.
What are the South African exchange control limits?
South Africa has regulations in place that govern the movement of money in and out of the Republic. Our exchange control regulations apply to every transaction, regardless of the recipient or the Rand amount. These regulations are the domain of the South African Reserve Bank, and it is their mandate to control and oversee the movement of capital across our borders. To assist in the execution of this mandate, the Reserve Bank assigns power to authorised dealers (banks) to oversee and regulate the market on its behalf.
How do South African exchange control regulations work?
- The rules apply to all transactions, regardless of size.
- No resident may perform an offshore transfer without prior exchange control approval from either an authorised dealer or the South African Reserve Bank.
- Only authorised dealers are allowed to perform currency transfers.
- All payments made to foreign parties are reported to the Reserve Bank.
Outward payments are only permissible under certain conditions on approval by authorised dealers or the Reserve Bank and there are specific limits in place for personal transfers in the form of allowances.
How do foreign exchange control regulations affect you?
For individuals, these rules stipulate how much and under what circumstances you will be allowed to transfer offshore, as a South African resident.
How does the SDA work?
South African residents over the age of 18 years, can make use of the SDA to move up to R1 million per calendar year overseas.
What can you use the SDA for?
The SDA can be used for any legitimate purpose at your own discretion (hence the name!), which means that you’re cool to send gifts to friends or family living abroad, make online purchases of goods in a foreign currency, or for the purposes of offshore investment, as long as you keep it under R1 million per year.
What do you need to use the SDA?
A valid green bar-coded South African identity document or smart identity card is all it takes. You will be required to provide details of the source funds. If you intend to use your allowance for travel purposes, supporting documents will be required.
How does the FCA work?
Along with the SDA, every South African resident aged 18 or older is also entitled to a foreign capital allowance of up to R10 million per calendar year.
What can the FCA be used for?
The FCA can be used for investment purposes e.g., to buy immovable property in foreign countries.
Important things to note when transferring funds abroad:
- The money you send offshore cannot end up in the hands of another South African resident, without prior consent from the Reserve Bank.
- Unlike the SDA, the FCA has an additional administrative burden and the use of this allowance requires a tax compliance status PIN verifying your tax compliance status with the South African Revenue Service in addition to your green bar-coded South African identity document or smart ID card that verifies that you are 18 years or older.
Exceeding your offshore transfer allowances
If you need to move offshore an amount larger than what the FCA will allow, you can apply to the Reserve Bank for special permission through your authorised dealer. For this, you will need to provide the authorised dealer with the following information/documentation:
- The amount you would like to transfer
- Supporting documents confirming the source of funds
- A supporting tax compliance status PIN
- Details regarding the investment
- The reason for the investment
FinGlobal: reliable cross-border financial services for South African expats
When you’re looking to use your offshore transfer allowances to move money out of South Africa, you need to partner with an institution who can help you get it done in a cost-effective, time-efficient and compliant manner. From tax clearance to the facilitation of the foreign exchange transaction, FinGlobal is ready to help you get your money where you need it to be.
Contact us today to find out how to start moving your money out of South Africa, smartly.