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Johannesburg - Last week's amendments to exchange control regulations was the surprise package of Finance Minister Pravin Gordhan's mini budget, but most commentators agreed the timing was perfect given the volatility in the rand.
Of the eight amendments, the most significant was the increase in the foreign capital allowance for local individuals as well as residents planning to emigrate.
The amendment increased the foreign capital allowance for private individuals resident in South Africa from R2m to R4m per person - a move which enables investors to diversify their portfolios.
Elsewhere in the various amendments, it was stipulated that emigration capital allowances could be increased to R8m from R4m per emigrating family unit (husband and wife), and from R2m to R4m per single person.
All capital allowances are a once-off occurrence, however.
Chantal Robertson, head of foreign exchange services at RMB Private Bank, said any investments held by people wanting to emigrate were also subject to the R4m allowance per person.
"Although local investments held by potential emigrants must be deducted from the allowance, individuals may also use their discretionary travel allowance," she said.
Some more changes
Pravin also increased the single discretionary allowance to R750 000 from R500 000 per year. This allowance is limited to individuals and applies to donations to missionaries, maintenance transfers (in accordance with divorce orders), monetary gifts, loans made to a South African resident living abroad, and funds for study and travel abroad. As before, children under 18 are allowed to take out R160 000 per person.
Robertson said exchange control easing was still subject to specific conditions, including a requirement that all transactions be confirmed with documentation such as divorce court orders in the case of offshore alimony payments.
"Applicants will also have to sign an undertaking that they will convert unused funds back to the country within 30 days of returning to South Africa," said Robertson.
Monetary gifts will also still attract a 20% donations tax, subject to a R100 000 exemption.
A couple with two children emigrating to Australia, without any investments and who did not travel abroad during the financial year, are allowed to take out R8m in their foreign capital allowance and R1 820 000 (750 000 x 2 + 160 000 x 2) in travel allowances.
In addition, emigrants may apply to the South African Reserve Bank to extract any additional liquid assets held in their personal capacity, subject to a 10% levy on the amount over R8m they wish to send out of the country.
Tax clearance is a requirement for both offshore transactions and those wishing to emigrate and take funds with them.
- Fin24.com