As the end of 2023 draws near, this is your reminder to make use of your annual exchange control allowances in order to move money out of South Africa. To ensure you maximise the use of your Single Discretionary Allowance (SDA) and Foreign Investment Allowance (FIA), we’ve put together a quick guide on what you need to know about offshore allowances, as there have been updates from the South African Revenue Service in terms of processes involved in taking money out of South Africa.
Transferring money out of South Africa: exchange control limits
As a South African tax resident, you have two annual allowances available to you in order to move money offshore. These are:
- Single Discretionary Allowance
- Foreign Investment/Capital Allowance
Collectively they can be used to transfer up to R11 million out of South Africa per calendar year, per adult individual.
Psssst. If you use your 2023 annual allowance before the deadline, and use your 2024 allowance early next year, you can effectively move double the exchange control limit out of South Africa in under six months, i.e. R22 million.
What is the Single Discretionary Allowance?
The single discretionary allowance (SDA) in South Africa is an exchange control offshore allowance of up to R1 million per calendar year that is available to each South African resident natural person over the age of 18. The SDA can be used for any legal purpose abroad, including travel, offshore investments, and generally remitting funds offshore.
How do you use the Single Discretionary Allowance to move money out of SA?
All you need is your green bar-coded ID book or Smart ID card
No prior tax clearance is necessary in using this allowance to move money out of South Africa.
Tips for using this offshore allowance:
Minors under the age of 18 have an allowance of R200 000
If you are married and your spouse is also a South African resident, you each get an SDA and can collectively move R2 million per year without tax clearance.
What is the Foreign Investment Allowance?
Also known as the foreign capital allowance, this is an annual exchange control allowance that can be used to move up to R10 million per calendar year out of South Africa.
How do you use the Foreign Investment Allowance?
In addition to your green bar-coded ID book or Smart ID card, you will need to make an Approval of International Transfers (AIT) application to gain tax clearance from SARS. For this, you will require the following paperwork for your application –
Supporting documents for Approval of International Transfers (AIT) for South- African residents:
- Documentation verifying the source of offshore fund transfers, along with specific requirements for different capital sources, detailed here.
- Statement of Assets and Liabilities for the past three tax years:
– This comprehensive report must include all investments, loan accounts, and payments from both local and foreign entities, including companies and trusts. The statement covers the preceding three tax years.
- Documentation of Granted Power of Attorney:
– In cases where the application is submitted on behalf of the taxpayer by an authorised individual, relevant documentation indicating the granted power of attorney should be provided.
Supporting documents for Approval of International Transfers (AIT) for Non-Residents:
Non-Resident Confirmation Letter from SARS:
To verify your tax residency status within South Africa and determine the date on which you became a tax non-resident, you must furnish your Non-Resident Confirmation Letter from the South African Revenue Service (SARS).
What happens if you need to move more money offshore than is permissible using the Single Discretionary Allowance and the Foreign Capital Allowance?
If you need to transfer an amount exceeding R10 million, you can initiate a special application through the South African Reserve Bank. This application will undergo a rigorous review process by SARS, including tax status validation, source of funds scrutiny, and a risk evaluation aligned with the anti-money laundering and counter-terrorism financing directives specified in the Financial Intelligence Centre Act 2001. In essence, this process is aimed at ensuring that your funds have been generated through legal means and are not associated with any shady activities.
South African exchange control offshore allowance deadlines for 2023
It’s important to note that the allowances are annual. As such they do not roll over to the following year and do not accumulate. It’s a case of use it or lose it, so don’t miss your opportunity.
The deadline for using your Single Discretionary Allowance is 31 December 2023. Your Foreign Investment Allowance must be used within one year of tax clearance being issued to you. To make a special application with SARB to transfer an amount greater than R11 million through FinGlobal, the deadline is 12pm on 22 December 2023.
FinGlobal: cross-border financial specialists for South Africans abroad
Making your money moves shouldn’t be complicated or stressful. That’s why we’ve designed our suite of online financial solutions to be convenient, hassle-free and 100% compliant with exchange control regulations and tax law.
FinGlobal is ready to assist you with:
- Using your exchange control allowances – transferring funds out of South Africa
- Withdrawing your retirement annuities – cashing in your retirement savings
- Completing tax emigration – ceasing your South African tax residency
- Remitting pension income abroad – taking money out of South Africa
- Requesting tax refunds from SARS – getting money back from the tax authority
To put our services to the test, leave your contact details below and we’ll be in touch to discuss your requirements. You can also send us an email to email@example.com with your financial emigration and or tax emigration related queries.