25 February 2022 by and 2022 Special Edition Budget Speech Alert

Exchange control modernisation

In the 2020 Budget Speech it was announced that the National Treasury would embark on a substantive revision of the South African exchange control regime. It was anticipated that the Exchange Control Regulations, 1961 would be rewritten and that restrictions would be relaxed significantly. Specifically, it was announced that the National Treasury would take a smarter, risk-based approach to foreign currency transactions and capital flows with the introduction of a capital flow management system.

Of these anticipated changes, only some have trickled through. For example, following the introduction of amendments to certain provisions of the Income Tax Act 58 of 1962, the prohibition on loop structures has been completely abolished. A further example is the removal of the distinction between emigrants and residents.

In the 2022 Budget Speech, the National Treasury has again confirmed its commitment to modernisation, and made several proposals.

In respect of individuals:

  • The export of dual listed securities to a recognised foreign securities exchange will be permitted subject to allowance limitations.
  • Residents may use their discretionary allowance to participate in online foreign exchange trading, but may not use credit or debit cards.
  • Residents may receive and retain gifts from non-residents offshore (no repatriation required).
  • Residents may lend or dispose of authorised foreign assets held offshore to other residents (but this will not apply retrospectively and past irregular transactions must be regularised).
  • Residents may transfer more than R10 million per year to offshore trusts (subject to tax and reporting requirements).
  • Authorised dealers may, on a once-off basis, remit abroad the remaining cash balances (of up to R100,000 in total) of people who have ceased to be residents for tax purposes, without reference to the South African Revenue Service.

In respect of companies:

  • Debt securities referencing foreign assets listed in a South African stock exchange will remain classified as foreign.
  • The foreign direct investment limit for companies investing funds offshore will increase from R1 billion to R5 billion, provided the stipulated investment conditions, tax obligations and reporting requirements are met. Excess income or profits of offshore branches and offices of South African firms may be retained offshore, subject to annual reporting.
  • Authorised dealers may process transfers from a parent company to a domestic treasury management company up to a maximum of R5 billion (an increase from R3 billion) per calendar year for listed entities, and up to R3 billion (an increase from R2 billion) per calendar year for unlisted entities. Funds transferred under this dispensation may be used for new investments, expansions and other transactions of a capital nature.
download PDF

The information and material published on this website is provided for general purposes only and does not constitute legal advice.

We make every effort to ensure that the content is updated regularly and to offer the most current and accurate information. Please consult one of our lawyers on any specific legal problem or matter.

We accept no responsibility for any loss or damage, whether direct or consequential, which may arise from reliance on the information contained in these pages.

Please refer to the full terms and conditions on the website.

Copyright © 2022 Cliffe Dekker Hofmeyr. All rights reserved. For permission to reproduce an article or publication, please contact us cliffedekkerhofmeyr@cdhlegal.com

You may also be interested in