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April 1, 2015

Supplementary relief for South African residents with regard to exchange control

Exchange control is imposed by the South African Reserve Bank to regulate the transfer of money in and out of South Africa. Making a foreign transfer is therefore not as simple as a brief visit to your bank or making the currency transfer online.

Prior approval must be obtained by residents from authorised dealers (i.e. banks or currency transfer companies) on behalf of the Reserve Bank before concluding a foreign transfer. This will depend on meeting certain requirements that include, among others, obtaining an appropriate tax clearance, obtaining a clearance from the Reserve Bank, making declarations of adherence to transfer allowances (set amounts for personal transfers), submitting audit trails of money remitted to South Africa that is to be repatriated, etc.

In his 2015 Budget Speech, Finance Minister Nhlanhla Nene announced significant relaxation of exchange control regulations with effect from 1 April 2015.

Firstly, South African residents’ foreign capital allowance will increase from R4 million to R10 million per calendar year or upon emigration, or R20 million per family unit. Residents seeking to diversify their asset base with larger investments abroad will benefit from this relief.

Secondly, the subcategories under the individual single discretionary allowance are removed and the annual R1 million allowances may be used for any legal purpose abroad. This implies that the R1 million may be transferred for any legal purpose without the requirement of obtaining a tax clearance certificate.

Lastly, the dispensation for credit card usage, currently limited to individuals, will be extended to corporates. This exemption from the usual exchange control requirements will provide some much-anticipated administrative relief for corporates engaging in foreign transactions via credit card facilities.

The Reserve Bank will provide details in future regarding any new administrative developments.

Please contact your relationship director should you require further clarity about this development regarding the application of exchange control.

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