October 24, 2023
Non-residents investing in South African property from abroad
Investing in property is a significant financial decision that comes with its share of complexities, particularly when it involves crossing international borders. South Africa, with its diverse landscapes and growing real estate market, has attracted the interest of many non-residents seeking to invest in properties. However, understanding the intricacies of South African Exchange Control Regulations, when bringing money into South Africa is crucial for a smooth and successful investment journey.
Exchange Control Regulations and Requirements:
South Africa has Exchange Control regulations in place to manage the movement of funds across its borders. Regulated by the South African Reserve Bank, these regulations are designed to ensure financial stability, manage currency flows, and prevent illegal activities such as money laundering. As a non-resident looking to convert foreign currency to Rands to fund the purchase of a property in South Africa, the following is important:
When transferring funds into South Africa, you’ll need to do so through an Authorised Dealer. An Authorised Dealer is a person or institution authorised by the Financial Surveillance Department (within the South African Reserve Bank) to deal in foreign exchange. This ensures that the transactions are properly documented and reported to the relevant authorities.
Source of Funds
The Authorised Dealer must guide you in the process to clearly demonstrate to the South African Reserve Bank that the Source of Funds (where the funds are from and how they were earned or raised) is legitimate. This is done with supporting documents, which provide a verifiable trail of the origin of funds.
There are typically 4 documents requested:
- Sale Agreement or Offer to Purchase (signed by both seller and purchaser)
- Passport or ID Documentation of purchaser
- Proof of address in your name where you currently reside (not older than 3 months)
- Statement of Account showing availability of funds (not older than 3 months)
The Source of Funds documents are particularly important, as they will, together with the MT103-form in case of a SWIFT inward transfer, be used to remit the funds out of South Africa efficiently and quickly in future, if you wish to sell and divest.
When purchasing property, ensure that all transactions are carried out through a registered South African attorney and that your sales agent is registered with the PPRE (Property Practitioners Regulatory Authority). They will guide you through the legal processes, ensure compliance with local laws, costs, and facilitate the necessary approvals.
As mentioned above, if you decide to sell the property and take the proceeds out of South Africa, the South African Reserve Bank through Exchange Control regulates this process as well. Your residency and tax status will be factors, but most important is to have the Source of Funds documents and the MT103 in order with the inward transfer, through your Authorised Dealer.
Finances and Foreign Exchange
Foreign purchasers can finance properties up to 50% through Mortgage Bond Applications in South Africa or through cash payments (proportional or in full) from South African or offshore bank accounts. For payments from foreign accounts, your foreign currency provider can save you a considerable amount of money by facilitating the conversion of funds between currencies.
Currency Partners assists international clients in transferring funds from abroad for property purchases or when sellers are remitting funds from the proceeds of a sale to an offshore account. We offer support in over 37 currencies, providing potential savings of up to 3% on the exchange rate.
For more information or assistance please email email@example.com or call +27 21 203 0081 to get in touch with our expert team.