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Moving money from South Africa: the Single Discretionary Allowance & the Foreign Investment Allowance

By August 25, 2020April 9th, 2021Forex

Moving money from South Africa: the Single Discretionary Allowance & the Foreign Investment Allowance

August 25, 2020

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If you’re thinking about moving money out of South Africa, you’ve got two ways to do it: by making use of your single discretionary allowance and your foreign investment allowance together, it’s possible to move up to R11 million offshore annually. What do you need to know about making use of these exchange control allowances? Let’s break it down for you, and take a look at what you need to know before you get started on an international money transfer from South Africa. 

What are the South African exchange control limits?

Before you take money offshore, it’s important to know exactly how the annual exchange control limits affect you. The South African exchange control is the set of rules and means by which the South African Reserve Bank manages the movement of money on behalf of the government. These exchange control rules set limits on how much money you can move out of South Africa, as well as detailing the conditions that must be met before you can transfer money into and out of South Africa, effectively restricting your access to any money you’ve left back home.

In terms of exchange control rules, there are two types of allowances that you can use to transfer money out of South Africa:

  1. The single discretionary allowance
  2. The foreign investment allowance

The biggest differences between these allowances? The Single Discretionary Allowance does not require prior tax clearance, while the Foreign Investment Allowance does.

What is the single discretionary allowance?

Your first option in getting money offshore is by means of the single discretionary allowance:

  • Using this allowance, adult South African residents can transfer abroad up to R1 million per calendar year, without a tax clearance certificate.
  • Minor children under the age of 18 have a limit of R200 000.

As the name “discretionary allowance” suggests, the money transferred using this mechanism can be spent on anything, such as:

  • Offshore investments: diversify your risk portfolio and send your money abroad.
  • Gifting: cash is always the one gift that never gets returned because it never goes out of style!
  • Financial assistance: lending a hand to a friend or family member in need of funds.
  • Study expenses: pay for study and tuition fees  through an international money transfer.
  • Child or spousal support: Pay maintenance funds to your spouse or ex-spouse.
  • International travel: pay for accommodation, tours and travel costs and reduce the amount of cash you carry when travelling abroad.

Top exchange control tip: double up on your single discretionary allowance smartly

Married? Your spouse has a single discretionary allowance, too. That’s right. If you’re a South African citizen and your spouse is one too, together you are able to transfer abroad R2 million per calendar year.

  • You can elect to make one lump sum transfer, or you can space the payments out over the calendar year, but making use of the single discretionary allowance cuts down on your admin and paperwork, because you can use this allowance without  getting tax clearance beforehand.
  • Furthermore, if you have children over the age of 18, you can transfer R1 million in each child’s name without needing to get a tax clearance, in addition to the R200 000 exchange control limit on each minor child.

What are the requirements for using the Single Discretionary Allowance?

While you do not require tax clearance from SARS in order to use this allowance, you will need:

  • A SARS tax number
  • To be over the age of 18 with the green bar-coded ID book or Smart ID card to prove it.

What is the foreign capital/investment allowance?

In addition to the R1 million available per adult in terms of the single discretionary allowance, South African residents may also transfer abroad up to R10 million per calendar year. In order to utilise the foreign investment allowance (FIA), you will need to obtain a tax clearance certificate beforehand, for exchange control purposes.

What are the requirements for using the foreign investment allowance?

  • You must be 18 years or older and have your green bar-coded ID document or Smart ID card to prove it.
    You must obtain a Tax Clearance Certificate from SARS, which means you will need a tax number and to have all your tax affairs in order.

FinGlobal: South African exchange control experts

If you’d like assistance staying on the right side of South African exchange control regulations, FinGlobal has all the expertise you need, in house. We’ll advise you every step of the way through using your single discretionary allowance or your foreign capital allowance to move your money offshore. We take care of all the paperwork and admin for you, presenting you with signature-ready documentation and giving you complete peace of mind that everything we do is fully compliant with all the necessary authorities.

FinGlobal offers a comprehensive suite of cross-border financial services for South African expats, including:

  • Financial emigration
  • Retirement annuity withdrawal
  • Exchange control advisory
  • Foreign exchange transfers
  • Tax emigration
  • Tax refunds
  • Tax clearance and more.

What are you waiting for? Contact us today to make use of your single discretionary allowance or foreign investment allowance to move your money offshore.

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