As globalization continues apace, more and more South Africans are seeking to take advantage of this new, more integrated world. Some people want to invest offshore, some want to immigrate and others just want to travel. Regardless of your motives, at a certain point, it becomes necessary to transfer money out of the country and that fact may leave you wondering – How do you move money overseas? How much can you move and is there any way to exceed the limit? How Much Money Can you Move Overseas from South Africa?
South Africans over the age of 18 are able to transfer money out of the country via 2 main outlets, namely –
- The Single Discretionary Allowance (SDA) – Enables transfers of up to R1 million.
- The Foreign Investment Allowance (FIA) – Enables transfers of up to R10 million.
After consulting our calculators and calling a few maths professors, we can determine that these two allowances enable SA residents to transfer a total of R11 million out of the country per calendar year. Simple right? Not so fast, you see, there are applicable reasons required for each transfer and different procedures depending on the allowance in question.
What is the Single Discretionary Allowance?
The SDA refers to the set limit of funds that may be transferred out of the country per calendar year by SA citizens over the age of 18 without requiring any supporting documents. Practically speaking, this means that you can move up to R1 million out of the country without first having to obtain a tax clearance certificate.
The SDA is used when you wish to move money out of the country for certain reasons including for things like, but not limited to –
- Gifts
- Loans
- Travel
- Donations
- Investment
- Study Allowance
To make use of your SDA you can apply through your bank and, if your reasons for transfer fit within the scope of an SDA, you should be able to move your funds without too much hassle. For the most part, you should only require your ID or smart ID card although certain transfers may require a few extra components, for example, money moved for a study allowance will require proof of registration.
What is the Foreign Investment Allowance?
The FIA allows residents to transfer up to R10 million out of the country per calendar year. This allowance is normally used for purposes of foreign investment and property purchases. One of the key differences between the FIA and the SDA is that the FIA requires a foreign tax clearance certificate from SARS, this certificate is then valid for 12 months.
By combining both your SDA and FIA together, each tax-compliant SA resident over the age of 18 can move up to R11 million out of the country each calendar year.
How Much Money Can My Family Transfer Out of the Country?
In contrast to individuals wishing to transfer funds overseas, family units that make use of the FIA are able to move up to R20 million out of the country per calendar year.
Is There a Way to Exceed Your Transfer Limits?
Yes, there are two main ways in which you can successfully exceed your R11 million transfer limit, they are –
- Special Dispensation – By applying for a Letter of Compliance from SARS and then receiving authorisation from the SARB, you may be able to increase your transfer limit. There is no cap on the amount that you may be allowed to transfer if successful but each case is examined separately after considering things like your reason for transferring funds and the details of your investments.
- Financial Emigration – Even if you’ve been living in a foreign country for a number of years, the SARB may still have you registered as a SA resident living abroad, this means that you will still be subject to the R11 million limit like the rest of us. By changing your status from resident to non-resident you should be able to exceed the R11 million limit.
While going through all these steps may be frustrating, if you intend to transfer large sums of money out of the country, they may be worthwhile in the long run.
Why do People Invest Offshore? – How Much Money Can you Move Overseas from South Africa?
While there are many potential benefits and disadvantages in offshore investments, the main draw for the majority of South Africans is that they wish to safeguard their funds from local dangers. Most newcomers to the world of investing realise quite quickly that keeping all your funds tied up in just one place is usually a recipe for disaster. If that one investment strategy fails, you could find yourself in hot water almost overnight.
The solution? Diversify your portfolio and make sure that you have multiple active investments which can help to mitigate any risks. This mindset leads many to wonder – Why limit yourself to one country?
By investing your money in countries other than South Africa, you are ensuring that turmoil and chaos occurring within the nation won’t have the chance to devalue all of your investments at once.
Foreign investments strategies are usually split into 2 main forms, namely –
- Direct – Direct investments occur when money physically moves from this country into another and can include the allowance measures mentioned previously.
- Indirect – Indirect investments occur when investments are made (normally in offshore unit trust funds) that are priced, and paid out, in rands. This means that the money never physically leaves the country and thus the investments can be made without first receiving a SARS tax clearance certificate.
If you spend enough time dealing with such offshore investment strategies, you’ll eventually come across another pertinent phrase – “rand hedging”. But what does this mean?
What is Rand Hedging? – How Much Money Can you Move Overseas from South Africa?
As noted, instability throughout South Africa can have adverse effects on the value of your investments, as such, some individuals choose to prioritise investments that would actually benefit from a weakened rand. In essence, this is another form of portfolio diversification and risk aversion. When the currency loses strength and hurts the value of your local investments, it’s useful to have investments overseas that profit from such a development.
Can you Open an Offshore Bank Account without Leaving the Country?
Yes, you can, you don’t need to go live in another country just to open an account there. Many individuals open accounts in places like the Isle of Man for purposes of foreign investment while others, who intend to move in the future, may open accounts in preparation for their emigration.
In Conclusion – How Much Money Can you Move Overseas from South Africa?
Taxpaying South Africans over the age of 18 are able to move a total of R11 million out of the country every calendar year. This can be accomplished by making use of the Single Discretionary Allowance (SDI) alongside the Foreign Investment Allowance (FIA).
The SDI allows an individual to transfer up to R1 million out of the country every calendar year without first receiving a SARS tax clearance certificate and is mainly used for things like travel, gifts and donations. On the other hand, the FIA requires a SARS tax clearance but allows you to move up to R10 million out of the country per calendar year. This allowance is normally used for foreign investments and property purchases. Additionally, family units are able to transfer up to R20 million per calendar year.
This R11 million limit can be exceeded in certain scenarios such as when financial emigration has occurred and the individual becomes registered as a non-resident or when a special dispensation is applied for via SARB. These special allowances do not have a fixed transfer limit and are instead decided after the individual’s petition is considered. Offshore accounts can often be opened without the individual actually living overseas, as such, many South Africans open these accounts while still remaining SA residents.
Foreign investments have multiple advantages and disadvantages but are most commonly used as an extra layer of protection against instability within the country. By investing capital outside of the country, individuals ensure that sudden shifts in the value of their local investments will not have a catastrophic effect on their portfolios and that the damage will be at least partially mitigated.
Investing offshore is done either directly or indirectly – Direct investments involve physically moving money overseas while Indirect investments normally entail investing funds with trusts that are priced and paid out in rands, this effectively means that the money never leaves the country and thus the investor does not first need to receive a SARS tax clearance certificate.
Lastly, rand hedging is the process whereby investments that benefit from a weakened rand are prioritised to further mitigate any damage that could occur should the currency lose strength.
Disclaimer LAW101: All of our posts are for research purposes only. Law 101 aims to assist its readers with useful information on the laws of our country that can guide you to make decisions in line with the South African Governmental Laws currently in place. Although our posts cite the constitution in many instances, they are intended to assist readers who are looking to expand their knowledge of the law. Should you require specific legal advice we advise you to get in touch with a qualified legal expert.
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