Travelling abroad and travel allowances – what you can and can’t do

The purpose of this article is to expand on the issues raised in that article and to highlight the most important rules that South African residents should be aware of, when applying for foreign currency to use for their travels abroad. 

General rules regarding the granting of travel allowances

As discussed in our Alert of 6 October 2017, all South African persons who are 18 years or older, are entitled to make use of the single discretionary allowance (SDA). The SDA comprises an amount of R1 million per calendar year, which any South African resident (18 years or older) may use for any legal purpose abroad, without obtaining a tax clearance certificate. South African residents who are under the age of 18 years, may be granted a maximum annual travel allowance of R200,000 per calendar year.

One of the legal purposes for which the SDA may be used is to take funds abroad in the form of travel allowances. In terms of the Currency and Exchanges Manual for Authorised Dealers (AD Manual), which must be read with the Exchange Control Regulations, 1961 (Regulations), persons may take foreign currency up to the limit of their SDA, ie R1 million, abroad in the form of travel allowances. From a practical perspective, this means that if, for example, persons have used R100,000 of their SDA during any calendar year before going on their December holiday, they may in principle apply to take foreign currency up the value of R900,000 abroad. It is important for South African residents to keep track of the amount of their SDA that they have used in a calendar year, as exceeding their SDA will constitute a contravention of the Regulations. 

Travel allowances may be taken abroad in the form of foreign currency banknotes, travellers cheques or may be transferred to the traveller’s own bank account or to the traveller’s spouse’s account, but not to a third party’s bank account. Minors’ travel allowances may also be transferred to their parents’ bank accounts abroad. Furthermore, travellers may also use their credit or debit cards to pay for travel expenses abroad, within their annual SDA limit.

Documentation and provision of foreign currency prior to travel

Where persons wish to make use of their SDA to purchase foreign currency from an AD for travel outside the Common Monetary Area (CMA), which consists of Lesotho, Namibia, South Africa and Swaziland, they must produce their passenger tickets. In such instances, they may not be furnished with foreign currency more than 60 days prior to the date of departure, unless the funds are to be used for business travel or land arrangements. Land arrangements refer to expenses related to tours, hotel accommodation and vehicle rental, which are made at the request of South African resident travel agents or tour operators.

When making use of their SDA to apply for a travel allowance, prospective travellers must provide the AD with a written undertaking that they will:

• travel within 60 days from the date of the request for foreign currency;
• not purchase foreign currency from an AD in excess of the applicable limits; 
• will offer for resale all foreign currency that they received in the event of the trip being cancelled, to an AD or an ADLA (authorised dealer in foreign exchange with limited authority, such as Bureaux de Change); and
• will offer for resale to an AD or ADLA any unused foreign currency within 30 days of returning to South Africa.

Permissible use of travel allowances

Although it might not be common knowledge, South African residents should be aware that any amounts taken or transferred abroad for purposes of travel may not be used for any other purpose, in terms of Regulation 2(4). Once a person has returned to South Africa from overseas travel, they must resell any remaining foreign currency to an AD or ADLA within 30 days, in terms of Regulation 2(5) read with Regulation 6(1). From a practical perspective, this means that if a person travels abroad with his family and has a foreign bank account, he may not deposit any unused portion of his travel allowance or any of his family members’ travel allowances into his foreign bank account and use it for investment purposes. Where any portion of an amount granted as a travel allowance is used for investment purposes in this manner, the funds and the growth on such funds, will constitute an unauthorised asset held in contravention of South Africa’s exchange control laws. A South African resident may have to pay a fine on such assets, or worse, forfeit the unauthorised asset and face criminal prosecution. 

With regards to Regulations 2(5) and 6(1) referred to above, business travellers who go on a business trip within 90 days of returning to South Africa from a previous business trip, may retain such foreign currency to use during the next business trip. Where persons have returned to South Africa from travelling abroad and have resold the unused portion of their travel allowance to an AD or ADLA, as required, they may use such amount at a later stage during the calendar year, as part of their SDA.

Conclusion

While it might seem that there is a lot to keep in mind when you apply for a travel allowance, it is not necessarily the case. The morals of the story are this:

• Don’t exceed your R1 million annual SDA limit when applying for a travel allowance;
• Don’t use any portion of your travel allowance for investment purposes abroad; and
• Resell any unused foreign currency to an AD or ADLA, within 30 days of returning to South Africa, unless you fall within the business traveller exception discussed above.

As long as a traveller keeps these things in mind, there is not too much to worry about. 

This article was originally published in the December 2017 edition of Without Prejudice.