5 August 2010

Out with the old and in with the new: recent exchange control developments

Several developments have occurred in the exchange control area recently. The exchange control amendments detailed below are in keeping with the Finance Minister's announcement of the intention to relax South Africa's strict exchange control rules.

New Exchange Control Rules

These new exchange control rules are effective from 9 July 2010:

  • A new limit of R50 0000 per transaction has been introduced for payments made by residents to non-residents which do not fall within the categories specifically listed in the exchange control rulings.
  • Several changes have been introduced with respect to emigrants (former residents) of South Africa. It is important to note that when one considers emigration from South Africa, these exchange control elements listed below must be considered together with the fact that capital gains tax will be levied on one's worldwide assets at the time of emigration.
  • Gift allowance increased to R750 000 - Emigrants may now have up to R750 000 (previously R100 000) of their blocked funds released annually as a gift allowance for gifts made to residents.
  • Annual limit of R750 000 for visits to South Africa - Emigrants may now have R750 000 (previously R75 000) of their blocked finds released on an annual basis when they visit South Africa.
  • R100 000 limit for the maintenance and alterations of fixed property abolished - Emigrants may now use an unlimited amount of their blocked funds to finance the maintenance and alterations done to their fixed property which forms part of their blocked assets. Documentary proof that such funds were used for this purpose must be made available, however.
  • 10% exit charge now applies to listed shares - An emigrant can now pay the 10% exit levy on the exit of listed shares, and proceed to hold such shares as a non-resident.

New Name for the Exchange Control Department

The Exchange Control Department of the South African Reserve Bank's name changed to Financial Surveillance Department as from 2 August 2010. The change comes in response to the different functions and responsibilities the department is to undertake in light of National Treasury's continued drive to relax exchange controls and rather focus on prudential regulation.

The exchange control regulatory landscape continues to change in the bid to keep South Africa competitive as it seeks foreign investment. Further developments can be expected in the future as the Financial Surveillance Department settles into its new role.

Afton Appollis, Associate, Tax

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