Just as there are rules for people when it comes to border crossing, there are also rules for money. We call these exchange control rules. According to these exchange control rules, South Africans can only move money across the South African border under two allowances. These are known as the Single Discretionary Allowance (SDA), and the Foreign Investment Allowance (FIA) (also referred to as the Foreign Capital Allowance). The SDA makes it possible to take up to R1 million out of South Africa, without prior tax clearance. This money can be used for a number of purposes, including travel.
Let’s break down what you need to know about the Single Discretionary Allowance and how the overseas travel allowance works, along with the tax implications of travel for personal and business purposes.
Travel for personal reasons: the overseas travel allowance
The overseas travel allowance is a sub-limit of the Single Discretionary Allowance and it can only be used for purchasing foreign currency for travel purposes. The overseas travel allowance is capped at R1 million for adults and R200,000 for minors. There are a few restrictions on the overseas travel allowance. For example, you can’t buy physical foreign currency more than 60 days before you leave on your overseas trip but you can save your money in a foreign currency account to secure your travel costs and make the most of currency movements.
Here are some additional things to keep in mind about the overseas travel allowance and the Single Discretionary Allowance:
- You can only use the overseas travel allowance for travel purposes. You cannot use it for any other purpose, such as investing in foreign assets or making loans to non-residents.
- You must declare the amount of foreign currency that you are purchasing for travel purposes when you buy it.
- You must keep a record of all foreign currency transactions that you make.
- Any unutilised foreign currency must be resold to the bank on your return to South Africa.
Travel for work: overseas travel allowance policy South Africa
Travel is making a comeback in the workplace which comes with expenses. When it comes to covering those expenses, companies have two choices: they can either pay for accommodation, meals, and reimburse any incidental costs, or they can give employees an allowance or advance that covers all these expenses upfront.
The tax treatment of the overseas travel allowance in South Africa depends on a number of factors, including the purpose of the travel, the length of the stay, and the amount of the allowance.
- Overseas travel allowances are taxable income, unless they are exempt or deductible.
- The purpose of the travel is important in determining whether the allowance is taxable.
- The length of the stay may also affect the tax treatment of the allowance.
- The amount of the allowance may also affect the tax treatment.
- Employees may be able to deduct additional expenses incurred as a result of the travel.
- Employees who receive overseas travel allowances should consult with a tax advisor to determine the specific tax implications of their situation.
Tips for South Africans who receive overseas travel allowances:
- Keep good records of all travel expenses, including receipts and invoices.
- Document the purpose of travel and the length of your stay.
If the travel is for business purposes, obtain a letter from your employer confirming the purpose of the travel.
If you incur additional expenses as a result of the travel, be sure to keep records of these expenses as well.
Exchange control allowances for non-resident expats
The overseas travel allowance and the Single Discretionary Allowance are not available to individuals who have formally emigrated through the South African Reserve Bank., Individuals who have ceased tax residency in South Africa may avail of the overseas travel allowance of R1 million in the same calendar year that they ceased tax residency.
FinGlobal: cross-border financial specialists for South Africans abroad
If you need assistance with your international money moves, FinGlobal is the name you can trust. From tax clearance to foreign exchange and tax emigration, we’re ready to help you every step of the way. We’ve already provided a superb, convenient service to thousands of South Africans across the globe, and we’re ready to do the same for you. To see how we can be of assistance in simplifying your cross-border financial transactions, contact FinGlobal today.