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South Africans living abroad (and at home) who have not yet completed the process of tax emigration are entitled to utilise their annual South African foreign investment allowance of R10 million to move money out of the country. There are a number of things to be aware of in order to remain on the right side of the law when utilising this foreign capital allowance, so read on to make sure you’re up to speed.

South African exchange control limits

What is the Foreign Investment Allowance?

Also known as a Foreign Capital Allowance, this is one of the avenues open to South African tax residents to move their money out of the country. In addition to the Single Discretionary Allowance of R1 million, individuals are permitted to transfer abroad R10 million per calendar year.

Rules around using the Foreign Capital Allowance: do’s and don’ts

Authorised Dealers may allow the transfer, as a foreign capital allowance, of up to a total amount of R10 million per calendar year per private individual who is a taxpayer in good standing and is 18 years and older, for investment purposes abroad.

What can you do with your Foreign Capital Allowance?

You can use it to purchase property in foreign countries, or you can use it to invest amounts larger than R1 million that would be covered under your Single Discretionary Allowance. It is also possible to use this allowance on money transfers for other purposes, where you have already used your Single Discretionary Allowance for the year. If you want to invest more than R10 million overseas, special approval must be obtained from the South African Reserve Bank (SARB) and you’ll have to comply with rigorous tax requirements.

You are allowed to invest your funds abroad in different asset classes and you’re free to disinvest and reinvest into different asset classes as long as you meet any disclosure requirements that relate to such foreign assets and income in accordance with South African tax legislation and you maintain compliance with the Financial Intelligence Centre Act.

You can also participate in offshore share incentive or share option schemes by means of your  R10 million foreign investment allowance, or you could take up new shares in foreign companies that have accrued to you by way of rights on existing holdings of shares through your foreign investment allowance. Income generated from the foreign investments may be retained abroad and does not have to be repatriated to South Africa.

Please note the following when using your Foreign Capital Allowance:

  • Investment into foreign trusts is not allowed  for transfers above R10 million.
  • Investments/foreign assets acquired may not be placed at the disposal of any other South African resident without the specific approval of SARB.
  • You cannot enter into any transactions whereby capital or the right to capital is directly or indirectly exported from South Africa.

What do you need to apply for a Tax Compliance Status (TCS) in respect of Foreign Investment Allowance?

You are required to submit the following supporting documents:

  • Documentation that shows the source of the capital to be invested. More information on this, here.
  • A statement of assets and liabilities for the previous three tax cycles (including all investments, loan accounts and distributions from local and foreign companies, trusts, etc.)
  • Applicable Power of Attorney where the TCS application is submitted on your behalf.

FinGlobal: your cross-border financial services specialist

Need a hand with tax clearance? Advice on how to move your money offshore in a tax-efficient, cost-effective manner? FinGlobal can help whether you’re starting a new chapter abroad, investigating emigration, or simply looking to invest money offshore as part of a risk diversification strategy, FinGlobal’s highly capable team has been carefully selected to ensure your every transaction is a smooth, successful process.

Why choose FinGlobal?

We are a licensed financial services provider, FSP number 42872, and approved by SARB to act as a foreign exchange intermediary, offering:

  • Speedy services delivered remotely – track our progress online
  • Highly competitive exchange rates and transparent, fixed fees
  • We’ve got all the tax and financial expertise you need, in-house
  • No upfront payment required, only once service has been rendered
  • Hassle-free convenience – we take care of everything for you
  • 100% success rate in everything we do

Interested in learning more about how FinGlobal can help you move your money safely out of South Africa? Leave us your contact details and we’ll be in touch!