Exchange control regulations in South Africa
All foreign exchange transactions from (and to) South Africa, whether you are living in South Africa or abroad, are subject to exchange control regulations which are set in place by the South African Reserve Bank. South Africans cannot simply transfer funds abroad freely. Instead any cross border transactions are subject to foreign exchange limitations.
The Single Discretionary Allowance
The Single Discretionary Allowance is an overall limit of R1 million per calendar year, which any South African over the age of 18 years can make use of. The allowance can be used for any legal purpose including making investments abroad, travelling or sending gifts abroad. This allowance may also be transferred to the traveller’s own bank account but not to an account of a third party.
Using and buying foreign currency
If you are using your SDA to purchase foreign currency for travel purposes, this may not be bought more than 60 days prior to your departure. In addition you may not use the foreign currency you purchase for any other than that stated/declared when you purchased it. When returning to South Africa, you must covert any unused foreign currency to South African rand within 30 days of you returning to the country.
Investing offshore
The Single Discretionary Allowance allows funds of up to R1 million to be transferred abroad without you having to obtain a Tax Clearance Certificate. If you want to invest more than your SDA of R1 million abroad, you may invest up to R10 million every calendar year. In order to do so, your bank must submit an application to the Financial Surveillance Department of the South African Reserve Bank for approval. A Tax Clearance Certificate must accompany the application.
Keep track of your funds
If you are travelling or transferring funds abroad for investment purposes, its important that you keep track of the SDA funds transferred annually to ensure that they do not exceed R1 million during any calendar year. If you want to take out more, you should make use of your foreign investment allowance that allows you to take out R10 million per person per calendar year. This is available to all South African residents and residents temporarily abroad – who have not formalised their financial emigration.