March 25, 2024

Private Clients

Offshore Investment Guide

Offshore Investment Guide

South African residents who are over 18 years old and possess a green bar-coded ID or smart ID, along with a South African income tax number, can utilise their individual offshore allowance of up to R11 million per calendar year (from January 1st to December 31st) for offshore investments.

This individual offshore allowance comprises a R1 million single discretionary allowance and a R10 million foreign investment allowance.

In this guide, we highlight the types of allowances:

Single Discretionary Allowance (SDA) – R1 million:

  • Individuals can spend or externalise up to R1 million offshore in a calendar year without the need for tax clearance.
  • This covers various offshore expenditures such as using a credit card for online purchases abroad, ATM withdrawals outside of South Africa, offshore investments, donations, etc.

Foreign Investment Allowance (FIA) – <R10 million:

  • Individuals can externalise an additional R10 million, subject to prior approval from the South African Revenue Service (SARS).
  • SARS requires proof of the source of funds, and individuals must be tax compliant both during the application process and at the time of externalising the funds.

Special Clearance (>R10 million):

  • Special clearance can be requested from the South African Reserve Bank (SARB) for amounts exceeding R10 million.
  • The application process is intricate and may take several months before SARB issues the special tax clearance. Once obtained, the funds are subject to restrictions, and individuals are responsible for annual reporting to SARB.

Approaches to Offshore Investing for Individuals:

  • Externalise funds using the above-mentioned allowances: Individuals can engage a foreign exchange services provider or their bank to assist with externalising funds, including special clearance for amounts exceeding R11 million.
  • Utilise existing offshore investments/funds: Transfer existing offshore investments directly to Currency Partners via a unit transfer without liquidating assets. Additional documentation may be required.

Approaches to Offshore Investing for Entities:

  • Local Entities: South African entities can invest offshore by utilising an asset swap facility from an authorised South African institution. The asset swap process may vary between providers.
  • Offshore Entities: Transfer existing offshore investments directly to Currency Partners via a unit transfer or transfer cash from an offshore investment or bank account to Currency Partners’ provided bank details upon acceptance of the application.

AIT’s and how they work?

Tax payers that are over the age of 18 years old and are South Africa residents are eligible for an Allowance for International Transfer of R10 million per calendar year. In order to utilise this allowance, the individual requires an AIT TCS pin letter. This entails an application with SARS, requiring:

  • Relevant material that demonstrates the source of funds to be invested, including the availability of funds.
  • Statement of local and international assets and liabilities for the previous three tax years.

Once your application has been approved, your SARS TCS pin in terms of AIT is valid for 12 months from date of issue and you can draw down on it as often as you like.

Individuals must be tax compliant both during the application process and at the time of externalising the funds.

Currency Partners can assist with the application to SARS with the required information and supporting documentation.

How transactions are reported to the SARB:

Authorised dealers such as Currency Partners are required to report international transfer of funds to the South African Reserve Bank in accordance with Exchange Control Regulation.

The reporting process involves the submission of relevant information about the transfer, including details such as the amount transferred, the purpose of the transfer, the identities of the sender and recipient, and other related information. This information is declared on a Balance of Payment (BOP) form to the SARB. This information helps the SARB to track foreign exchange flows in and out of South Africa and ensure compliance with exchange control regulations.

Inheritance of an Offshore Asset:

When it comes to claiming a foreign inheritance bequeathed to you abroad from a South African estate, irrespective of whether you are living in South Africa or not, there are some important facts you should be aware of. 

During the 2022 Budget Review, an amendment was made that relates to the retention of foreign gifts and other authorised foreign assets abroad. 

Resident individuals may now retain foreign assets inherited from a South African estate, where the finalisation date of the Liquidation and Distribution Account is on or after 23 February 2022.

These assets or funds may now be transferred to an offshore account in your name without you being obligated to declare the funds to the South African Reserve Bank (SARB) or repatriate the funds back to South Africa.

However, should the finalisation date of the Liquidation and Distribution Account be before 23 February 2022, the previous ruling still applies in order to retain the asset or funds abroad. 

In order to keep such assets abroad without repatriating them to South Africa, if the date of the finalisation of the Liquidation and Distribution Account is before 23 February 2022 an application to the SARB can be submitted. On approval from the SARB, the assets can be retained abroad.

Currency Partners can assist with the application to the SARB with the required information and supporting documentation.

Please contact us on +27 21 203 0081 or email enquiries@currencypartners.co.za for more information and assistance.

We look forward to hearing from you and saving you money on the exchange rates.
SPEAK TO AN EXPERT