3.7. Foreign currency holdings and other foreign assets held by resident individuals (South African Resident Individuals)

3.7.1
Foreign currency holdings

Individuals and foreign nationals who are holders of foreign currencies outside South Africa must, unless exempted elsewhere in terms of the provisions of this document, offer to sell their holdings to an Authorised Dealer within 30 days from the date of becoming entitled thereto.

A serious view will be taken by the Financial Surveillance Department of any unauthorised retention of foreign currency balances, whether with foreign banks, overseas principals, agents or shippers.

3.7.2
Funding structure

Individuals may raise loans abroad to finance the acquisition of foreign assets without recourse to South Africa. Only authorised foreign assets may be used as collateral in this instance and under no circumstances may local guarantees or suretyships be issued or may South African assets be encumbered.

Individuals are allowed to participate in offshore share incentive or share option schemes, provided that such participation is financed under the R10 million foreign capital allowance and/or the R1 million single discretionary allowance.

Individuals are allowed to take up new shares in foreign companies that have accrued by way of rights on existing holdings of shares, provided that transfers in payment thereof are dealt with in terms of the R10 million foreign capital allowance and/or the R1 million single discretionary allowance.

3.7.3
Income earned abroad and foreign capital introduced

Income earned abroad on or after 1997-07-01 may be retained abroad. It should be noted that income earned abroad and own foreign capital introduced (excluding export proceeds, sale proceeds from the sale of South African assets and capital repatriated on which the 5 per cent levy has been paid in terms of the Exchange Control Amnesty and Amendment of Taxation Laws Act, 2003 (Act No. 12 of 2003) into South Africa from the above-mentioned date by individuals resident in South Africa, may be re-transferred abroad (excluding any growth on the funds introduced). Documentary evidence confirming that the income and/or capital had previously been converted to Rand must be furnished to the Authorised Dealer concerned and only the Rand equivalent of any amount repatriated is eligible for re-transfer abroad.

In cases where income is earned abroad as a result of services rendered by individuals normally resident in South Africa, such individuals should be physically abroad whilst rendering these services, in order to qualify for the aforementioned dispensation.

3.7.4
Disposal of legal foreign assets

Individuals may with effect from 2022-02-23 dispose of their authorised foreign assets to other individuals, subject to local tax disclosure and compliance by the relevant parties.

It should be noted that where the authorised foreign asset is sold to a private individual with recourse to South Africa, the transfers in payment thereof must be dealt with in terms of the R10 million foreign capital allowance and/or the R1 million single discretionary allowance.

Any sale of the authorised foreign assets to private individuals where payment will take place locally in Rands resulting in no cross-border flow of funds other than change of ownership, such transactions must be referred to the Financial Surveillance Department and will also be subject to local tax disclosure as well as compliance by the relevant parties.

Contraventions that occurred before 2022-02-23 must still be regularised with the Financial Surveillance Department.

3.7.5
Donations of legal foreign assets

Individuals may with effect from 2022-02-23 donate authorised foreign assets to other private individuals, subject to local tax disclosure and compliance by the relevant parties.

The donations may also be retained abroad, subject to local tax disclosure and compliance by the relevant private individuals.

Contraventions that occurred before 2022-02-23 must still be regularised with the Financial Surveillance Department.

3.7.6
Lending of legal foreign assets

Individuals may with effect from 2022-02-23 lend authorised foreign assets to residents, including trusts, subject to local tax disclosure and compliance by the relevant parties.

Where the authorised foreign assets are lent to other residents for use abroad, such transactions must take place without any recourse to South Africa. Any arrangements to repay such foreign commitments from South Africa and/or for repayments to take place locally in Rands, such transactions must be referred to the Financial Surveillance Department.

Where the authorised foreign assets are lent to other residents for use locally, the matter must be referred to an Authorised Dealer.

Contraventions that occurred before 2022-02-23 must still be regularised with the Financial Surveillance Department.

3.7.7
Reinvestment into South Africa (“loop structures”)

Resident individuals with authorised foreign assets may invest in South Africa, provided that where South African assets are acquired through an offshore structure (loop structure), the investment is reported to an Authorised Dealer as and when the transaction(s) is finalised as well as the submission of an annual progress report to the Financial Surveillance Department via an Authorised Dealer. The aforementioned party also has to view an independent auditor’s written confirmation or suitable documentary evidence verifying that such transaction(s) are concluded on an arm’s length basis, for a fair and market related price.

Upon completion of the aforementioned transaction, the Authorised Dealer must submit a report to the Financial Surveillance Department which should, inter alia, include the name(s) of the South African affiliated foreign investor(s), a description of the assets to be acquired (including inward foreign loans, the acquisition of shares and the acquisition of property), the name of the South African target investment company, if applicable and the date of the acquisition as well as the actual foreign currency amount introduced including a transaction reference number.

Existing unauthorised loop structures (i.e. created by individuals prior to 2021-01-01) and/or unauthorised loop structures where the 40 per cent shareholding threshold was exceeded, must still be regularised with the Financial Surveillance Department.