Moving Money Offshore: SA’s Tax Clearance and Allowance Rules Briefly Explained

Need to get your hands on funds left behind in South Africa now that you’re living abroad? Here’s how it’s done, according to the taxman’s rules.

As a South African resident living abroad, the Reserve Bank, including SARS, has certain exchange control allowance rules about how you’re permitted to access the money you’ve left back home.

There’s the single discretionary amount that’s capped at R1 million annually and then there’s a foreign investment amount, capped at R10 million.

What’s the difference between the two? The first one doesn’t require tax clearance, while the second one does.

The latter option also requires a boatload of paperwork, documentary evidence and can get rather complicated.

Let’s take a quick look at the differences between the two main ways you can move your cash overseas and the implications for you.

Requirements to access these funds through exchange control allowances:

• Valid green South African ID book or ID smart card
• Older than 18 years of age
• Active SARS tax record, tax affairs in good standing.

Accessing your funds through the discretionary allowance rule:

• You are able to transfer R1 million per adult individual per calendar year
• No prior tax clearance is required
• You are able to use these funds for any legitimate purpose at your discretion, without any documentary evidence.

Accessing your funds through the foreign investment allowance rule:

• You are able to transfer R10 million per adult individual per calendar year
• Prior tax clearance is required, so you must effectively apply to SARS for approval
• You must make a declaration that you have adhered to the allowance limits and must be able to produce documentary evidence of how the funds were spent, within their various category limits.

The easiest way to move your money abroad is by means of your exchange control allowances. You can use your annual discretionary (R1 million) or foreign investment (R10 million) allowances, or a combination of both to effectively transfer up to R11 million to your new home each year, for any legal purpose.

However, there are a number of requirements that must be satisfied, which vary depending upon your reason for transferring money out of South Africa.

Clearance for transferring money abroad can only be obtained by an authorised dealer of the Reserve Bank, which means you’re unlikely to find any foreign-based currency company where you live now that is able to facilitate such transfers beyond South African borders.

This means that when you’re thinking about moving your money out of South Africa, you’re looking at a choice between banks and foreign exchange companies based in South Africa.

Here’s why foreign exchange transactions through an experienced, trusted intermediary like FinGlobal makes sense:

• A breach of foreign exchange control regulations (regulated by the SARB) can amount to a criminal offense in certain cases, which makes compliance critical in order to avoid financial penalties.
• Using a foreign exchange intermediary approved by the SARB gives you peace of mind that your compliance is covered and by helping you to tick all the right boxes and jump through all the right hoops.

FinGlobal’s foreign exchange service will be there to provide you with:

• Excellent exchange rates with low fees
• Unrivalled personal service with free exchange control advice
• Signature-ready documentation with secure and compliant processing.

FinGlobal will also be there to obtain your tax clearance certificate if required and we’ll even go the extra mile and open a bank account for you in South Africa, if you don’t already have one.  Contact us today to get your free foreign exchange quotation.

Article supplied by FinGlobal