DALL-E
Many South Africans would like to take some of their funds offshore, either for investment or personal reasons. The question they are then faced is whether they are able to do so. Thankfully, South Africans are able to take their money offshore, thanks to the Single Discretionary Allowance (SDA) and the Foreign Investment Allowance (FIA). These allowances are governed by the South African Reserve Bank (SARB) and exchange control regulations.
These allowances let you legally move money offshore to invest, shop, or travel, while staying tax compliant and on the right side of exchange controls.
What is an SDA?
The SDA is the easiest and most flexible option. If you’re a South African tax resident over the age of 18, you can transfer up to R1 million per calendar year without needing tax clearance from SARS. This is ideal for buying goods from international websites, paying for overseas travel, education and even subscribing to foreign services. The best part is that it’s hassle-free; just use your bank’s foreign exchange (forex) services, or a service like Shyft.
What is an FIA?
If you are looking to invest more than R1 million abroad, you can apply for an Foreign Investment Allowance (FIA), which allows you to spend up to R10 million offshore per year. For this, you will need to apply through SARS’s eFiling system by submitting an Approval for International Transfer application. You’ll also need a tax clearance certificate, which means SARS will check that your taxes are in good standing before approving the transfer. FIA is ideal for bigger investments like buying property overseas, or investing in foreign businesses or shares.
A common misconception is that exchange controls exist to stop you from investing offshore; this is not the case. These rules are in place to ensure money is transferred legally and transparently (goodbye Greylisting!). The SDA and FIA allow you to access global opportunities in a stress-free and legal manner.
Ed: Note that emigration involves more than just moving money offshore – you can read more about that in these posts:
Tax Tuesday
Being tax efficient is an important part of great financial management. In this blog, a group of South African tax experts at AJM Tax share their tips and explanations on tax issues. Learn everything you need to know about tax, from deductions you never knew about to retirement savings and capital gains. The first Tuesday of every month is Tax Tuesday.
