The Financial Surveillance Department (FinSurv) of the South African Reserve Bank (SARB) regulates and monitors cross-border transactions. It also aims to ensure that financial institutions and market infrastructures operating within the financial system are inherently intact.
FinSurv is specifically mandated to investigate transactions when contraventions of the Exchange Control Regulations are suspected, and to take appropriate administrative action. Some of the actions may include blocking of funds, attachment of money and/or assets, and fines.
The processing time for applications submitted to FinSurv is between two and four weeks, depending on the nature and complexity of the application. This excludes the time taken to process the application at the Authorised Dealer or ADLA before its submission.
Let’s look at the background. In terms of the Currency and Exchanges Act and the Exchange Control Regulations, the control over South Africa’s foreign currency reserves lies with National Treasury. Foreign currency means any currency other than currency from South Africa, but excludes the currencies of Lesotho, Namibia, and eSwatini. Foreign currency is deemed to include any bill of exchange, letter of credit, money order, postal order, promissory note, traveller’s cheque, or any other instrument of foreign exchange.
The National Treasury may under certain conditions, grant permissions or exemptions for transactions. This would include accruals and spending, so if you are a South African individual, the current Exchange Control legislation allows you to open bank accounts in foreign jurisdictions but you must be a legal entity (individual/company) and you have to comply with certain prescriptive Exchange Control conditions. The conditions are stipulated in the Currency and Exchanges Manual, available on their website. The Currency and Exchanges guidelines are issued to assist individuals, businesses, and other interested parties by providing a general understanding of the exchange control system in South Africa.
Different principles apply to companies (Legal Entities) and resident individuals (Natural Persons), as summarised below:
Legal Entities:
In terms of the Currency and Exchanges Manual, your SA company’s local bank may authorise your foreign bank account, as long as your business has legal or genuine sources of income abroad such as dividend accruals, export, and service payment receipts, accruals in terms of the Currency and Exchanges Manual, or accruals in terms of FinSurv. Stringent FinSurv conditions apply to these accounts, for example, the provisions of Regulation 6, but dividends earned abroad are exempted from this Regulation. Funds in foreign bank accounts must be for transactions permitted in terms of the Currency and Exchanges Manual or as authorised by FinSurv.
Legal Entities must, in writing, confirm to the bank that will be approving the account that no debits other than transfers to South Africa will be passed over the foreign bank accounts. This means that approval will be required from FinSurv for a ‘set-off’ between offshore credits and debits.
Legal Entities must also ensure that the foreign bank accounts are conducted within these conditions to prevent the SA Reserve Bank from closing the account or instructing repatriation of funds to South Africa. A Legal Entity may sell any foreign currency from offshore to a local bank within 30 days. Balances in a foreign bank account must be regularly repatriated to South Africa within 30 days, including export receipts but excluding offshore dividend accrual, or funds that may be retained or utilised offshore, as long as this is approved by the SA Reserve Bank. When a local bank authorises the opening of an offshore bank account for a Legal Entity, the company would need to provide FinSurv with a list of details about the company and the reason for the offshore account.
Individuals:
The Single Discretionary Allowance (SDA) allows individuals of 18 years and older to create a foreign bank account but limits it to R1 million per individual per calendar year. It is not necessary to obtain a TCS PIN letter from SARS for this, and the funds may be invested or used for any legal purpose outside of South Africa. These funds may be used for any legal purpose abroad, including for investment purposes.
You may use this allowance without producing special documents to your bank, except if you want to travel outside the Common Monetary Area (CMA), in which case you will need to show them your passenger ticket. Your capital investments must be converted to foreign currency through your local Bank first, but SDAs may be transferred to other countries in Rand. You will have to show a valid green bar-coded South African identity document or Smart identity document card to your bank for verification, so that these transactions can be reported to the SA Reserve Bank.
As long as you are 18 years or older and a taxpayer that has fulfilled the requirements of SARS, you may have a foreign bank account and you can transfer up to an amount of R10 million per year offshore. This allowance is intended for offshore investment purposes and must be converted to foreign currency when transferred from South Africa. You will have to show your valid green bar-coded identity document or Smart card identification to the transferring bank before they will activate the transfer. In addition to the ID document, you will need to obtain a TCS PIN letter (valid for twelve months) from SARS, as proof to the transferring bank that you are tax compliant before they will allow any outward transfer of currency. If you do not have a tax reference number, you will have to register at your local SARS branch to get it first, before banks will allow you to invest abroad.
Since June 1997 private individuals living in South Africa can keep offshore income that has been earned abroad, or for services that were rendered to non-residents while they were abroad. However, the proceeds of exports must still be sent back to South Africa within 30 days. In the case of inheritances or legacies from legal foreign estates that you became entitled to after the 17th of March 1998, you do not have to declare this and you may keep the capital and any income that is generated abroad.
If you have inherited or received any foreign asset as a gift or donation from a non-resident after the 23rd of February 2022 you can keep it in another country but you have to declare it for tax purposes and compliance. You do not need to also declare it to your local bank or the SA Reserve Bank. If you have inherited assets before that date, or if the deceased held those assets outside of the provisions of the Exchange Control Regulations, you will have to apply for regularisation of these assets to FinSurv, via a local bank.
You can read more about FinServ and the requirements for you as an individual, or your business in the Currency and Exchanges Manual on the South African Reserve Bank’s website.
For business guidelines go to https://www.resbank.co.za/content/dam/sarb/what-we-do/financial-surveillance/financial-surveillance-documents/2020/Currency%20and%20Exchanges%20Guidelines%20for%20Business%20Entities.pdf
For guidelines applicable to individuals go to https://www.resbank.co.za/content/dam/sarb/what-we-do/financial-surveillance/financial-surveillance-documents/2020/Currency%20and%20Exchanges%20Guidelines%20for%20Individuals.pdf
Should you need further clarification or assistance, contact us or visit our website for more information about our services: https://currencyassist.co.za/