Per a Stats SA International Tourism report from May 2024, well over three-hundred thousand South Africans embarked on international trips during early 2024. 

With so many South Africans travelling abroad, there is often confusion surrounding what they can and cannot do when utilising their local banking facilities abroad. Whether travelling abroad for leisure or exploring potential emigration opportunities, complying with South Africa’s banking and exchange control regulations, as enforced by the South African Reserve Bank (SARB), is critical.

To avoid nasty surprises such as frozen bank accounts, or being stranded abroad, here’s a breakdown of the some of the most prevalent misconceptions:

1. The End of the Single Discretionary Allowance (SDA)

Myth: The R1-million Single Discretionary Allowance has been abolished.

Fact: While it is true that the former R200 000 annual allowance for residents under the age of 18 has fallen away, the SDA for resident adults (18 years and older) remains in place. Every South African resident adult is still permitted to transfer up to R1-million abroad per calendar year under the SDA. 

For larger transfers, individuals may also access an additional Foreign Capital Allowance (FCA), coupled with an Approval for International Transfer (AIT) Tax Compliance Status (TCS) PIN allowing transfers up to R10-million. Anything beyond this threshold requires pre-approval from SARB for international transfers.

2. Holiday Expenditures Don’t Affect the SDA

Myth: Spending money abroad on holiday and travel expenses does not impact your SDA.

Fact: Holiday spending abroad is indeed considered part of your SDA. South African resident adults’ travel expenditure will accordingly eat into their SDA. Residents over 18 can use up to R1-million for travel abroad. In contrast, residents who are under the age of 18 are restricted to a travel allowance capped at R200 000 annually. 

Proof of identification, as well as a passenger flight ticket is required to authorise foreign spending. However, no approval or documentary evidence is required for travel expenditure inside the Common Monetary Area, being eSwatini, Lesotho, Namibia and South Africa.

It's important to remember that foreign currency cannot be bought more than 60 days before departure and must be used only for the declared purposes. Unused currency must also be converted back to rand within 30 days of returning.

3. Unlimited Credit Card Transactions Abroad

Myth: Credit card transactions abroad are unlimited.

Fact: The SARB has strict controls on foreign currency payments by means of local credit cards. A single transaction cannot exceed R50 000. While small purchases are allowed, splitting larger transactions to bypass this limit is prohibited. Residents should be aware that breaching these limits can result in unforeseen and problematic consequences, such as bank account freezes, particularly if SARB deems the breach intentional.

4. Individuals Can Approach SARB Directly

Myth: South African residents can directly approach SARB for approval on foreign transactions.

Fact: SARB does not engage directly with individuals. Individuals must route any requests through an Authorised Dealer (AD), which is a local bank registered under the Banks Act, No. 94 of 1990, as amended; and approved to handle foreign exchange transactions. 

SARB’s Financial Surveillance Department will only accept applications submitted through local ADs, which act as an intermediary. Due to the subtle technicalities involved, those residents seeking to remit funds abroad are advised to partner with experienced exchange control specialists, to ensure a compliant and seamless experience.

5. Funds Invested Abroad Fall Outside of SARB Scrutiny

Myth: Once funds are remitted and invested abroad, SARB regulations fall away.

Fact: For those resident investors seeking to capitalise on foreign markets, it is critical to note that cross-border transactions exceeding the FCA, will bear an on-going compliance burden. In these circumstances, ADs will require annual reports on asset classes invested in and the updated values thereof:

Excerpt from Authorised Dealer SARB Approval obtained in respect of permission to remit funds in excess of the prescribed limit

The purpose of this oversight is to track capital outflows, balance-of-payments and statistical information. Where these funds are invested in global shares, mutual/index funds or ETFs, there may also be deemed capital gains tax implications in the event of future emigration from South Africa. 

Navigating SARB’s Exchange Control Regulations

While the South African Reserve Bank’s exchange control rules are designed to maintain financial order, their complexity often leads to confusion. Misconceptions around allowances, credit card usage, approvals required, and the reporting of overseas transactions can easily lead to costly mistakes. Staying informed and working with seasoned exchange control practitioners will ensure compliance and avoid delays.

Written by Michelle Phillips, Tax Attorney at Tax Consulting SA; and Richan Schwellnus, Tax Attorney at Tax Consulting SA