The South African rand is a freely floating currency, but despite some liberalisation since the end of apartheid, numerous foreign exchange controls still exist in the country, restricting international money transfers. These currency restrictions exist for citizens as well as for permanent and temporary residents, and we recommend that you seek expert advice when transferring money to South Africa or if you are planning to send money from South Africa. Working with an experienced money transfer provider is crucial to help you go through the process.
We have provided below some initial guidance on these areas and always recommend that you consult in the first instance with your chosen broker, as well as any other personal or business, legal and financial advisors.
To be able to trade currencies and provide financial advice in South Africa, a broker or money transfer provider must be a registered Financial Services Provider (FSP). Any FSP must work through an Authorised Dealer Bank in South Africa, which must themselves also be licensed by and registered with the central bank, the South African Reserve Bank (SARB), the main financial regulator. The purpose of these regulations is no different from many other countries that look to both regulate the flows of funds in and out of the country and to curb money laundering.
South African citizens and permanent residents over the age of 18 have a R1m discretionary allowance on transfers, which can include items such as foreign investment, loans, luxury goods purchases and business payments. This is a total limit across all the categories combined in any one calendar year (January to December) without the need for tax clearance. There is also an allowance of an additional R10m of foreign investment per calendar year, though this must be approved by both SARS and SARB.
We recommend that you check with your money transfer provider whether any additional fees will be charged for Tax Clearance/Reserve Bank clearance applications where required. Many banks and traditional financial advisors charge for these services, but many brokers do not. As such, using a broker could save you money. It is worth noting that the transfer limits for South African citizens are reviewed every March, though the SARB can change these limits at any time.
Monies that you are transferring to South Africa are allowed to be transferred out again, though proof of the transfers of these funds moved into South Africa would be required. We recommend that you keep records of all transfers in and out of South Africa. Usually, this is best done in the form of copies of your SWIFT transfers and copies of your bank statements where funds were sent to South Africa.
For certain purchases, additional documentation may be required. If you are selling a property, for instance, then ask your broker for assistance in preparing these documents – they can often recommend local attorneys to help. There may also be a Reserve Bank Clearance application to complete, and again, we recommend that you ask your broker for assistance here as some will offer this service for no extra charge. The central bank’s exchange-control department reserves the right, if necessary, to require a staggered transfer of such funds to maintain exchange rate stability.
South Africa property purchases, sales and rental income
When buying a house in South Africa, there are no restrictions on non-residents purchasing property. Mortgage offers are also a lot lower as almost all banks will offer 50% of the value of the property at a maximum. It is also important to remember that there are transaction costs, which can range between 5% and 15% of the house price.
For non-residents/temporary residents, if you are selling a property, you are typically allowed to transfer all of the funds brought into the country for the purchase back out of the country as well as any profit or gain you may have made on the sale. If you are receiving rental income from a property in South Africa, it is also possible to transfer these funds out of the country, but this will also require supporting documentation.
Tax is levied on the purchase of property above certain amounts. In 2014, the lowest threshold was R600,000, above which the tax rate is 3%. The rates then continue to increase up to a maximum marginal rate of 8%. If funds are being sent to South Africa to purchase a property, remember to factor in these additional amounts to your overseas money transfer.
Visas and work permits for South Africa
Expats who are moving to South Africa are required to obtain a work permit from the Department of Home Affairs prior to beginning working in South Africa. Other family members of an expat worker will also require visas but will initially be given temporary residence permits when they arrive.
Taxation in South Africa
Residents of South Africa are taxed on their worldwide income. Non-residents are taxed on income that is from a South African source or any source that is viewed as being South African. In 2019, the law was changed to include any South African resident who worked overseas, regardless of how long they were actually in the country for, as having a taxable income. Any income over the value of R1m is subject to a 45% tax rate.
There are a large number of tax implications for any expat moving to the country. You should seek out specific tax advice, particularly because the tax issues will differ depending on the country from which you are moving.
The summaries above merely provide guidance on these areas, and we recommend that you consult in detail with your chosen broker and any other financial or legal advisors as required for your personal or business situation.
South Africa’s economic background
Like its fellow emerging economies India, Brazil, Turkey and Indonesia, South Africa has been strained by the global economic downturn. South Africa has risen to become one of the largest and most advanced economies in Africa and a major destination for foreign direct investment (FDI). However, in addition to the damage done by weak economic policy, the US Federal Reserve’s announcement in 2013 that it would begin to reduce its foreign bond-buying programme prompted rapid capital withdrawals from emerging economies, putting pressure on their currencies and undermining investor confidence.
South African currency
The South African rand (ZAR) is abbreviated with the symbol “R”. The central bank issues banknotes in values of R10, R20, R50, R100 and R200. Coins are available in values of 10, 20 and 50 cents and R1, R2 and R5.
