More of the carrot, less of the stick? Important changes to the exchange control rules for individuals

On 23 February 2022, following the publication of the 2022 Budget, the Financial Surveillance Department of the South African Reserve Bank (FinSurv) released circulars amending some of the exchange control rules applicable to individuals. We discuss some of these amendments here.

17 Mar 2022 4 min read Tax & Exchange Control Alert Article

Export of multi-listed domestic securities by private individuals

Up until a few years ago, South African residents who held shares listed on various exchanges, were not allowed to export their South African listed shares to another exchange. In Exchange Control Circular 5/2022 it was announced that the exporting of these dual/multi-listed securities would be allowed, in terms of amendments made to section B.2(B) of the Currency and Exchanges Manual for Authorised Dealers (AD Manual). Section B.2(B) now states that private individuals may, as part of their single discretionary allowance (SDA) and/or foreign capital allowance (FCA), export multi-listed domestic securities, subject to tax compliance and reporting to FinSurv via a central securities depository participant, in conjunction with an authorised dealer.

The reference to tax compliance appears to refer to section 9K of the Income Tax Act 58 of 1962 (Act), which came into effect in 2021 and states that a deemed disposal for capital gains tax purposes arises where a share is delisted from a South African exchange and listed on a foreign exchange.

From a practical perspective, an individual seeking to export shares to a foreign exchange using her annual SDA of R1 million would only need to approach her authorised dealer to assist them to obtain the necessary approval letter from FinSurv. An individual seeking to transfer listed shares worth more than R1 million would have to make use of her FCA and would have to obtain a tax compliance status letter from the South African Revenue Service (SARS) in this regard. The individual would potentially have to deal with the impact of section 9K of the Act in her application.

Online foreign exchange activities: Good news for the crypto asset industry

A notable announcement was made in Exchange Control 6/2022 to amend section B.2(B) of the AD Manual to expressly permit individuals to fund their online international trading accounts by using their SDA or FCA. However, individuals may not fund these international trading accounts using South African credit, debt and virtual card transfers. The use of these trading accounts to invest in crypto assets is expressly referred to in the amended section.

This announcement will be welcomed, especially by the crypto asset industry, as it provides much needed clarity. It appears that this amendment was made pursuant to the recommendation being made by the Intergovernmental Fintech Working Group (IFWG) in its position paper released in June 2021. It remains to be seen whether some of the IFWG’s other recommendations will be implemented, such as the proposal to include a BOP code specifically for crypto asset transactions.

Foreign trusts

In terms of Exchange Control Circular 8/2022, section B.2(B) of the AD Manual was further amended to state that FinSurv will now consider applications by private individuals who wish to invest in excess of their annual FCA limit of R10 million in different asset classes and that such offshore investments may also be made via a foreign domiciled and registered trust. The amendment states that this dispensation also applies to private individuals who have existing authorised foreign assets, irrespective of their value.

South African individuals making use of this dispensation must keep in mind that where funds are transferred to an offshore trust structure, either from South Africa or from an offshore account, they would still need to comply with South African tax law provisions applicable to loans and donations, depending on the nature of the transfer made.

Foreign donations and inheritances

For a long time, there was a distinction to the rules applicable to the receipt of foreign donations and foreign inheritances. Whereas foreign inheritances from a bona fide non-resident state have been exempt from Exchange Control Regulations 6 and 7 for a few years, this did not apply to foreign donations. Pursuant to the amendment announced in Exchange Control Circular 7/2022, foreign donations are now also exempt from the obligations under Regulations 6 and 7, subject to the recipient complying with his tax obligations in this regard. This only applies to foreign donations received on or after 23 February 2022 and contraventions prior to this date would still need to be regularised.

In addition, South African residents may now also donate, lend or dispose of authorised foreign assets to other South African residents, subject to local tax disclosure and compliance by both parties.

In relation to the inheritance of foreign assets, South African residents inheriting foreign assets from a South African resident estate are now also exempt from Regulations 6 and 7, subject to local tax disclosure and compliance. As stated above, this previously only applied to foreign assets inherited from bona fide non resident estates. However, if the foreign assets held by the deceased were unauthorised assets, these assets must still be regularised with FinSurv.


Many of these changes follow the trend that seems to have started with the relaxation of loop structure rules – whereas regulatory oversight was exercised through exchange control rules it is now exercised through rules in tax legislation. This is evident from the fact that for each of the amendments discussed, exchange control relaxation occurs subject to the required tax disclosure and compliance taking place (except cases where a person only makes use of their SDA). It is thus anticipated that SARS may receive more tax compliance status letter applications under section 256 of the Tax Administration Act 28 of 2011, for individuals seeking to invest abroad using their FCA.

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