When it comes to moving money out of South Africa, there are rules and limitations on when and how much you’re allowed to shift offshore. In terms of our exchange control regulations, South Africans have two avenues through which they can move their money abroad. The Single Discretionary Allowance of R1 million, and the Foreign Capital Allowance (also referred to as the Foreign Investment Allowance) of R10 million. Each of these allowances has different legislative requirements, so let’s take a look at what you need to know about putting them to work for you.
South African exchange control limits
Use your allowances before the end of 2021: transfer deadline is 23 December 2021
There are two allowances that make provision for South Africans to move their money out of the country. Both allowances refresh at the start of each new year, so if you use the allowances before 31 December 2021, you’ll be able to transfer an additional R11 million at the start of the new year. This gives you the means to either move more money offshore in a shorter period of time.
To ensure that you will be able to claim your annual allowances in time, we are setting the cut-off date for the transfer of funds, at 23 December 2021.
This is a precautionary measure as we need enough time to ensure that the funds reach the nominated offshore bank account before 31 December 2021.
While December 23 might sound like it’s miles away, in red tape time it’s practically next week. You know how long everything takes when there are government departments involved? You’re going to want to hustle to get those tax clearance applications in if you’re to avoid missing out for this calendar year. Processing times at the South African Revenue Service (SARS) can be even longer than usual as we head toward the festive season, resulting in delays that could block you from using your 2021 annual exchange control allowances. Remember: SARS switches to skeleton staff on 16 December, so you’re going to want to have your documents submitted long before then if you’re to get approval in time.
Using my exchange control allowances: how much money can I transfer out of South Africa each year?
South African residents have access to two annual allowances for transferring money out of South Africa:
- R1 million single discretionary allowance (SDA)
- R10 million foreign investment allowance (FIA)
What is the difference between the Single Discretionary Allowance and the Foreign Investment Allowance?
Broadly speaking, the main difference is the level of paperwork and administrative hoops through which you will need to jump before you will be allowed to send your money overseas.
The Single Discretionary Allowance is the easiest to use. It lets you transfer up to R1 million abroad without the need for prior tax clearance.
The Foreign Investment Allowance can be used (once you’ve obtained a Tax Clearance Certificate) to shift up to R10 million abroad, provided you can vouch for the legitimacy of the source of your funds.
The SDA of R1 million per year can be used for travel, foreign investment, study and alimony payments. You can basically use this allowance for anything – the clue is in the word ‘discretionary’. The FIA for larger amounts up to R10 million will require a Tax Clearance Certificate from SARS, with South Africans generally using this allowance to invest offshore or to mitigate their currency risk.
What if I need to transfer more than my allowances?
If you’ve already maxed your R11 million allowance for the year, you’ll be required to make a special application to SARS for tax clearance, which will then allow you to make a special application to the South African Reserve Bank to give you permission to transfer more.
However, your annual allowances reset in January each year, so if you need to move more than R11 million, you can time it just right to use your allowances to move R22 million in just a few short weeks.
It’s a numbers game: how to stack up your discretionary allowances and move more money
Each South African has a discretionary allowance of R1 million for transferring money out the country. This means that if you have a spouse, together you can transfer R2 million as well as an additional R1 million for each child over the age of 18 years.
How long does it take to get a tax clearance certificate from SARS?
- You can submit your application to any SARS office and it typically takes 21 working days to be approved or declined.
- Applications that entail amounts greater than R10 million will be subject to a special review process by the compliance risk unit at SARS. FinGlobal: cross-border financial specialists for South African expats
We’re ready to help if you need a hand organising tax clearance so you can utilise your FIA allowance before the end of 2021. We offer free consultations to get to know your unique circumstances, and we handle all SARS and SARB processes on your behalf to ensure safe, compliant and secure foreign currency transactions to get your money where it needs to be.
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