Sarb and exchange controls

Welcome

THE SOUTH AFRICAN

RESERVE BANK AND

EXCHANGE CONTROLS

EXCHANGE CONTROL DEFINITIONS

• Emigrant – SA resident who is leaving or has left the Republic to take up permanent residence outside the CMA.

• Emigrant Blocked Account – The account of an emigrant from the CMA to which exchange control restrictions have been applied.

• Resident – Any person (natural or legal entity) who has taken up permanent residence, is domiciled or registered in the Republic.

EXCHANGE CONTROL DEFINITIONS

• Resident Temporary Abroad – Any resident who has departed from the Republic to any country outside the CMA, with no intention of taking up permanent residence in another country, but excluding Residents who are abroad on holiday or business travel.

EXCHANGE CONTROL HISTORY

• First introduced in SA during 1939.• The current control measures, as amended,

became effective as from 1/12/1961.• Introduced in 1961 owing to the

deterioration of the capital account of the balance of payments. Introduced to block the repatriation of the proceeds of non-resident owned securities.


• In 1978 the Financial Rand System was introduced. This system laid down the terms and conditions on which the Rand proceeds of sales of assets owned by non-residents in SA could be reinvested or transferred to another non-resident.

• 7 February 1983 exchange controls over non-residents were abolished.


• 2 September 1985 the Financial rand system was reintroduced. Effect was that the local sale of non-resident owned assets could not be converted into foreign currency at the Commercial Rand rate but had to be retained in SA with Authorised Dealers in the Form of Finacial Rand balances.


• 13 March 1995 all exchange controls over non-residents were abolished.

• June 1995 SA institutional investors were allowed to asset swap part of their portfolios. This concession has been relaxing ever since.

• June 1997 private individuals were allowed to invest offshore. Started at R200k, then R400k, then R500k, then R750k and now R2m.

DISCRETIONARY/FOREIGN CAPITAL ALLOWANCE

• SA residents are allowed the following allowances;

• An annual R500,000 discretionary allowance for travel, gifts, donations and maintenance. This is in addition to :-

• A once off Foreign Capital Allowance of up to R2 million per person.

EMIGRATION PROCESS

• Applicants must complete a MP336(b) form furnishing details of the nature and value of their assets in SA.

• Applicants must furnish all supporting documentation required in terms of MP336(b) form.

• Applicants must complete a SARS IT 21 form. • These documents are now forwarded to the

Authorised Dealer for review.

EMIGRATION PROCESS

• After initial review the Authorised Dealer will provide a certified copy of MP336(b) form which is attached to the IT21. This is sent to SARS.

• Turnaround time at SARS 1 day to 21 days.• Upon SARS approval the Authorised Dealer

submits all the documentation to SARB.• Turnaround time at SARB 10 weeks +.

EXPORT OF HOUSEHOLD & PERSONAL EFFECTS

Household and personal effects, motor vehicles, caravans, trailers, motor cycles, stamps and coins (excl. SA coins) with an overall value up to R1 million may be exported.

CONTROL OF BLOCKED RANDS

• After the emigration application has been facilitated, the remaining SA assets of the emigrant must be brought under the physical control of the Authorised Dealer concerned.

• This is to ensure that all capital accruing after date of emigration and the proceeds of any asset subsequently sold, are placed to the credit of a blocked account with an Authorised Dealer.


Funds held in a blocked account may be used for• Investment in quoted SA securities.• Investment in unitised investments (unit trusts).• Up to R75k per family unit for expenses while visiting SA

at a rate of R3,000 per day and R1,500 per day for children under 12.

• Travel expenses in respect of subsequent travel to SA.• Payment of expenses re emigration (eg packing &

removal).• Payment to SARS for tax on income earned prior to

emigration.• School & university fees for children who remain in SA.


Funds held in a blocked account may be used for:• Payment of professional fees to accountants, tax consultants and

attorneys for services rendered.• Payment of premiums on long term insurance policies (Life,

Endowment and RA). Proceeds would still be blocked.• Payment of rates and taxes on vacant stands (non-income earning).• Maintenance payments to a local resident in terms of a court order.• Payment of medical bills for treatment while visiting SA.• Release of up to R100k pa in respect of gifts, donations and

maintenance to third parties resident in SA.• Release of up to R100k pa in respect of maintenance & alterations to

fixed property which form part of controlled assets.

• Payments of short-term insurance premiums.

INCOME ACCRUING TO EMIGRANTS

• The authorised dealer may allow the remittance of income to an emigrant provided that there is a documentary evidence that:– The funds represent earned income from normal trading

activities and do not include any element of a capital nature.

– The assets from which the income accrues are the sole property of the emigrant.

– No third party has any interest in the income to be transferred.

SARB EXIT LEVY

• Emigrants can request to transfer blocked assets in excess of the limited foreign capital allowance, subject to an exiting schedule, at the discretion of the Exchange Control Department of the SA Reserve Bank, but at an exit charge of 10% of the amount.

• When application is made to transfer such funds the process is as follows;

SARB EXIT LEVY

• Individual sends instruction to his Authorised Dealer to apply to SARB for approval to transfer funds from Blocked Account.

• AD then applies to SARB. This takes between 2 – 6 weeks.

• Upon receiving approval from SARB application is made to SARS for Blocked Funds clearance. This takes 5 -10 working days, depending on the SARS office.

• AD may only transfer the funds upon approval from SARS.

• This process must be repeated every time the individual wants to take money out of SA.

ALIMONY AND EMIGRATION

• Authorised Dealers may permit transfers to non-residents for alimony against production of a court order.

• Authorised Dealer may allow payments of R9,000 over the amount in the court order.

• It does not seem to appear that Alimony payments form part of the R500,000.

ESTATE DUTY TAX FOR NON-RESIDENTS

• Only the SA assets of a non-resident will be included in his estate for the purpose of determining his SA estate duty liability.

SA WILL FOR NON-RESIDENTS

• Benefits of a Local Will are:– Separate administration of the estate carried out in parallel to the

administration of the offshore assets.– An executor familiar with the procedures required in SA can save time

and therefore costs.– An opportunity for early advice on any potential taxation and succession

dangers.• Only an approved SA executor can wind up an estate in SA.• Advisable to have a will in SA if;

– Assets are substantial,– They are urgently needed by beneficiaries and timing is of

importance.• It is vitally important that where more than one Will is in existence

that both documents dovetail together and do not have the effect of revoking one another!

LEGACIES AND DISTRIBUTIONS FROM ESTATES

• Legacy transfers– Cash bequests and cash proceeds due to beneficiaries permanently

resident outside the CMA, including emigrants, may be remitted abroad.

– Securities inherited must be endorsed “Non-Resident” and may exported to the legatee.

– Where beneficiary is an emigrant assets may only be transferred once it has been determined that the individual has been formally redesignated as a non-resident.

– Where the estate holds authorised foreign assets – these assets may be distributed once all foreign administrative costs have been met from the foreign portion of the estate.

LEGACIES AND DISTRIBUTIONS FROM ESTATES

• Export of Jewellery and Personal effects– Authorised Dealer may allow the transfer of

jewellery and personal affects after having seen the L & D account.

• The above applies to a SA resident bequeathing assets to a non-resident as well as to the SA estate of a non-resident.

TRUSTS AND EMIGRATION

• Trusts funded from own assets get more favourable treatment than 3rd Party funded trusts.

• SARB will always determine who the “funder” is and are not who the “donor” is.

• Where the trust was established and funded by the emigrant – SARB will consider allowing the income derived to be transferred to the emigrant

• SARB will not allow income to be transferred to a 3rd Party ie a non-resident child of the funder. Funds will be credited to a blocked account.

TRUSTS AND EMIGRATION

• Distributions to non-residents:– Income and capital will be credited to a Regulation 4(2)

blocked account during the lifetime of the funder.

– On the death of the funder the distributions from the trust become a legacy and may be transferred.

• Required Procedures:– There are a number of administrative procedures that

must be complied with on emigration.

SA OWNED POLICIES

• Retirement Funds:– Income payments emanating from Pension

Funds, Provident Funds or Retirement Annuities may be paid to the non-resident account if original policy was declared on MP 336(b).

– Retirement annuities must have been in place for at least 5 years.

SARB TREATMENT OF ASSETS

• All transactions will be controlled by the AD.• No cash may be transferred by individual –

only by AD.• Loan accounts cannot increase or decrease

with AD approval. All repayments must be made to Blocked Account.

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CONTACT DETAILS

Johannesburg

• First Floor, Block 3, Morning View Office Park, Corner Rivonia & Alon Roads, Morningside, 2196

• Tel : 011 784 0004

• Contact: Gordon Stuart

• Email: [email protected]

Economy & Finance

Sarb and exchange controls