As legislation provides currently, South African residents with a green barcoded ID document or new ID cards can take up to an annual amount of R10 million out of the country to use offshore, which requires tax clearance to be obtained from the South African Revenue Service (Sars). However, the same person is also subject to an annual Single Discretionary Allowance (SDA) amounting to R1 million or R200 000 for persons under the age of eighteen (18). This can be used for travel, study abroad or investing in offshore instruments. This SDA does not require tax clearance and is only applicable from January 1 to December 31, and no unused allowance may be carried forward.
What few are aware of is that certain online purchases and reservations, might also be allocated against your annual SDA, but if used correctly you can utilise an extra amount over and above your SDA for these purchases.
There are categories for offshore transactions:
1. Asset purchases
With asset purchases, you will either import the assets to South Africa or leave them abroad, if the latter is the case, it will be offset against the purchaser’s SDA. If you import the assets, you can do a once-off payment and import them, but the understanding is that Sars will still request you to apply for importer/exporters codes. If you do such an import, it is seen as an invoice payment and not allocated to your annual SDA.
2. Credit and/or Debit card payments while travelling or use locally for online purchases
According to the Currency and Foreign Exchange guidelines for individuals (2017.02.24 Sarb), individuals with locally issued credit and/or debit cards are permitted to make foreign currency payments for small transactions (e.g., imports over the internet) by means of such credit and/or debit cards. Payments are limited to R50 000 per transaction. However, cardholders will not be absolved from ad valorem excise and customs duties or from complying with the requirements imposed by Customs. Any singular transaction exceeding R50 000 may not be split to circumvent the limit applicable to this dispensation.
Cross-Border Advice at FNB Financial Advisory explained it as follows; credit card and debit card transactions are reported in one of two ways over the Cross-Border Reporting System:
- If used to purchase items over the internet, i.e., miscellaneous imports, these transactions are reported as import transactions. This is outside of the SDA, and there is a transaction limit of R50 000. Typically, we refer to these transactions as “card not present”. Purchasing an item on Amazon will thus be seen outside of your SDA. As soon as a transaction is more than the R50 000 limit it is flagged, and you will need to explain. If it is seen as an asset import Sarb might clear it without infringing your SDA.
- If South African residents use their locally issued debit or credit cards while travelling, i.e., “card-present transactions”, these transactions are automatically reported as travel expenditure and are then allocated against the individual’s SDA. In addition, where travel costs such as accommodation (bookings through Airbnb) etc., are paid from South Africa but relate to upcoming trips abroad, this is referred to as “land arrangements”, and is also counted against the SDA. While making use of taxi services such as Uber in a foreign country will also be set off against your travel allowance.
3. Invoice payments via Telephone Transaction (TT) Payments:
Invoice payments that are done via normal TT payments will not form part of your SDA – but if the asset remains in a foreign country (offshore unit trust investment) it will be allocated against the purchaser’s SDA.
Other imports that will not be offset against one’s annual SDA are as follows:
Currency and Foreign Exchange guidelines for individuals (2017.02.24 Sarb)
In addition to the SDA, residents may export Krugerrand coins or the equivalent in fractional Krugerrand coins up to an amount of R30 000 as gifts to non-residents, subject to the completion of the prescribed Sars Customs Declaration.
Miscellaneous commercial payments and receipts; payments effected under this section require the presentation of documentation (invoice) and will not be deducted from the SDA limit of R1 million per calendar year.
Facilities may be provided to residents of the RSA to cover the cost of specialised medical and dental treatment abroad provided documentary evidence confirming the amount involved is declared to the Authorised Dealer concerned. This facility is in addition to any holiday travel allowance provided.
Finally, note that it is absolutely prohibited to use a South African credit or debit card to play any Lotto or game of luck on a platform outside SA. The National Gambling Act (No. 7 of 2004), as amended by the National Gambling Amendment Act (No. 10 of 2008), states that Exchange Control (Excon) residents may not participate in any gambling activities not authorised in terms of the Lotteries Act (No. 57 of 1997).
It is important to understand that, in terms of Financial Surveillance (FinSurv) rules, Excon residents are not allowed to use their South African credit and/or debit cards to make payments to foreign platforms. The South African Reserve Bank (Sarb) issued specific instructions to all issuers of credit cards such as American Express, Diners Club, MasterCard and Visa not to accept such debits against the South African accounts of Excon residents.
Investors who travel abroad several times during the year must carefully keep track of their spending and the currencies they purchase on these trips, especially if they make use of the SDA for investing offshore as well. In the event that you make use of only one bank or forex trader to purchase foreign currency for your transactions, the bank will inform you immediately if you have breached your allowance for current the year. If it is done via different institutions, which is most often the case, it may only be picked up years down the line. Years ago, I had a client that was in violation of the annual allowance – which was picked it up by Sarb, but only three years after the actual investment was made. In this case, the amount was minimal, and the client came to an agreement with the Sarb.
I am not aware of any situation where Sarb has penalised an investor when they exceeded allowances. That is not to say that they will not, it is at their discretion.
If an investor is found negligent then Sarb will apply penalties, and they will insist that the investor repatriate foreign individual allowance exceeded amounts.