Here’s what the Budget Speech means for foreign exchange allowances

On the 25th of February Minister of Finance, Nhlanhla Nene delivered his first budget speech since his appointment last May. For South African investors looking to move funds abroad, the news is positive.

The changes outlined in the Minister’s speech take effect on the 1st of April. Let’s unpack the changes to offshore investment allowances, and how they apply to us.
(If you’d like to discuss how this works practically, call Anton on +27 (0) 11 465 7356, or email anton@ydl.co.za.)

Currently, an individual can invest up to R5 million offshore per calendar year. This is made up of R1m without a tax clearance certificate from SARS (the single discretionary allowance) and an extra R4 million (the foreign exchange allowance) for which you have to submit a valid tax clearance certificate.

But the depreciation of the Rand and the rising prices of offshore properties have meant that the allowance has not been sufficient for some of our investors. This is particularly true for those wanting to allocate a substantial portion of their wealth to offshore assets as a hedge against further weakening of the Rand.

As part of the Minister’s bid to modernise capital flow management, he has significantly increased the foreign exchange control allowance per individual from R4 million to R10 million (R20 million per family unit). This effectively means that an individual can invest up to R11 million offshore (R1m without a tax clearance, and R10 million with a tax clearance).

For the first million per annum, the previous subcategories will be removed, meaning that there will no longer be restrictions on how the funds will be used abroad (providing no laws are broken, of course).

Furthermore, the annual limit can be increased through special application. This includes South Africans wanting to invest in a second property anywhere else in the world.

Some have criticized the budget’s relaxation of exchange controls, as they fear a flight of capital. And, there is an argument that says that capital generated in South Africa should not be moved to fund investments offshore.

Overall, I’m optimistic about the implications of the budget speech on offshore investment. Exchange control relaxation will improve the natural flow of money in and out of South Africa, and boost competitiveness and investor confidence. Having said that, the reality is that exchange controls have been gradually relaxed for some time now, and that the latest changes will primarily only benefit the very wealthy.

The upshot is that you will soon be able to legally move more money from South Africa than before, so allowing you to grow your global wealth by investing in offshore property.

At YDL we have years of research and hands-on experience backing up every single investment decision. So call us today on+27 (0) 11 465 7356, email anton@ydl.co.za, or visitwww.ydlinvestment.co.za, and get your investment questions answered by the experts.

I look forward to talking to you.

Warm regards,