Sending money out of South Africa? Know your limits
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If you're a South African resident, planning to send money overseas, now's the time to take advantage of your transfer limits before they reset in 2023. Here's what you need to know about using your allowances before they expire.
What is a foreign investment allowance?
South African residents have two allowances for transferring money out of South Africa that reset on 1 January every year.
In a single calendar year, a South African tax resident over the age of 18, who has a South African ID book or card, can send:
- R1 million using your Single Discretionary Allowance (SDA)
- Up to R10 million using your Foreign Investment Allowance (FIA) – this requires tax clearance from SARS.
You may use your SDA for gifts and loans, donations, maintenance and alimony payments and travel expenses (within 60 days before departure). You can also use it for studying abroad (if you have proof of registration). Any overseas purchases on your South African debit or credit card will also count towards your SDA.
The FIA (also known as a Foreign Capital Allowance) is intended to be used for investments, such as purchasing offshore property or investing in offshore share portfolios.
For amounts over and above R10 million per calendar year, you will need special dispensation from the South African Reserve Bank. These applications are judged on a case-by-case basis, and are approved in most instances by the SARB, so it's worthwhile getting help from an expert who's familiar with the process.
Your allowance when you're non-tax resident
When you leave South Africa and become non-tax resident i.e. physically change your status with SARS to non-tax resident, you no longer have access to the SDA and you have to make use of the FIA in every instance to transfer remaining funds out of SA.
Funds that do not need tax clearance
After you become non-tax resident, you do not need permission from SARS to transfer "income source" funds out of the country. For example: rental income, dividends and pensions. However, you will need a certificate of good standing from SARS every year. You will need to maintain a SARS eFiling profile and ensure your profile with SARS remains compliant in order to do this each year.
Funds that require tax clearance
Funds from a "capital source", such as the sale of shares, property, investments or an RA, require tax clearance approval from SARS.
At the time that you tax emigrate (change your tax status with SARS), you can apply for an Emigration Tax Compliance Status certificate, which confirms you're in good standing with SARS and allows you to transfer your remaining capital (up to R10 million) offshore. This is valid for 12 months from date of issue and can be issued only once.
Thereafter, you need to apply for a Foreign Investment Tax Clearance certificate when you wish to transfer funds offshore, to prove that they were obtained from a legitimate source and that your tax affairs are in order. As with the tax clearance certificate for South African residents, you will need to apply for a new certificate every time you wish to transfer funds offshore.
Receiving an inheritance from South Africa
In general, the above limits will apply when you are a South African receiving an inheritance from South Africa.
However, if you're non-tax resident and you are no longer active on the SARS registered database (or never had an SA tax number), SARB has made a special concession that allows you to transfer inheritances up to R10 million offshore without tax clearance.
When to use your allowances
Your offshore allowances are tied to the calendar year, not the tax year, so if you're planning to send money offshore in the next few months, you should take advantage of your 2022 allowance before the end of December.
If you are looking to make a large payment or purchase (such as a property), now's the best time of the year to do it as you can split the payment over December and January, making use of both the 2022 and 2023 allowances.
However, to use your 2022 FIA, you'll need to act quickly as clearance certificates are currently taking a little longer than usual due to a backlog at SARS. It's also worth bearing in mind that SARS generally operates on skeleton staff over the holidays, so we suggest getting your applications in by 15 November at the very latest.
When you're looking to transfer money out of South Africa, you deserve the best possible exchange rates, fees and personalised customer service.
Sable International's forex division specialises in transfers of over R100,000 and can assist with discretionary allowance payments, inheritances, study allowances, tax clearance applications, transferring your RA out of SA, and more at excellent, bank-beating exchange rates.
Get in touch on +27 (0) 21 657 2153 or saforex@sableinternational.com.
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