Moving money across international borders can be a complex dance, especially when it comes to paying for services rendered. Exchange control regulations can get complicated, fast! To avoid confusion, we’ve compiled a straightforward guide to equip you with the knowledge to understand the exchange control rules surrounding the transfer of payments for services.

Getting the payment ball rolling: where to start?

The first step is understanding whether you’re dealing with unrelated parties (think freelancers or independent contractors) or related parties (think subsidiaries, family members, or affiliates). Each scenario triggers different exchange control requirements that must be adhered to.

Payments between unrelated parties: a smoother journey

Sending money: As a South African resident paying a non-resident for services rendered abroad, Authorised Dealers, like your bank can usually approve the transfer without much hassle. Just ensure you have proper supporting documentation like agreements and invoices, – these are required to verify the transaction’s legitimacy.

Receiving money: If you’re a South African resident receiving payment from a non-resident for services rendered within South Africa, you’re generally free and clear of restrictions. However, be mindful of the fact that South African residents are taxed on their worldwide income, which may be relevant depending on the nature of your services and the applicable double taxation agreement (DTA) between South Africa and the payer’s country.

Payments between related parties: stepping into scrutiny

Sending money: Things get a bit more involved when dealing with related non-residents. Transfers require approval from the Financial Surveillance Department (FSD) of the South African Reserve Bank (SARB). Here’s where the arm’s length principle plays a key role – the transaction must be conducted at fair market value, which means avoiding any sweetheart deals.

Remember:

• Heed the rules: Section B.3(B)(x) and B.3(C)(ii) of the Currency and Exchanges Manual for Authorised Dealers are your official reference points for regulations regarding such transactions.
• Who to use: Authorised Dealers can handle unrelated party transactions under certain conditions, but related party scenarios usually require FSD approval.
• Documentation is key: Contracts, invoices, independent valuations, and tax clearance certificates are essential for compliance.
• Seek professional help: For complex transactions, consult your bank, financial services provider or a cross-border financial advisor familiar with the exchange control rules.

FinGlobal: expert cross-border financial specialists

Whether you’re making or receiving an international payment for services rendered, FinGlobal can assist. We’re ready to offer you reliable exchange control advisory services to ensure that all of your transactions are compliant, as well as competitive foreign exchange rates to ensure that your cross-border transactions are cost-effective. We’ve already helped thousands of South Africans in more than 105 countries with various aspects of their cross-border financial requirements, and we can’t wait to offer you the same convenient, trusted services.

To find out how FinGlobal can assist, simply contact us and we’ll get to work as soon as you give us the go-ahead!