Exchange Control in South Africa
What is foreign exchange control?
Simply put, the government manages the amount of Rand being sold on international markets.
- Exchange control can take many forms, but its immediate aim is to restrict the buying and selling of a national currency or to preserve foreign currency reserves.
- Controls might include a ban on the conversion of the proceeds of certain assets or by certain categories of person, an obligation to surrender foreign exchange proceeds to the central or local bank, authorisation requirements, quantitative limits or indirect methods.
- Exchange controls are most commonly imposed because of concerns about outward flows, but controls can also be imposed to restrict inward flows, for e.g. an influx of funds risks damaging an economy.
The purpose of exchange control policies is to prevent the loss of foreign currency resources through the transfer abroad of real or financial capital assets held in SA; and it constitutes an effective system of control over the movement into and out of SA of financial and real assets, whilst simultaneously avoiding interference with the efficient operation of the commercial, industrial and financial system
What are the exchange control restrictions
Ok, I know I am restricted, but how much Bitcoin can I buy abroad and sell in South Africa?
Single discretionary allowance (R1m)
South African residents over the age of 18, may avail themselves to a total of one million Rand per calendar year. Whilst this was originally intended for travel and leisure use of the rules have since been relaxed. The single discretionary allowance may used for any legal purpose abroad (including for investment purposes).
This is a single amount of R1m that may be “exported” from South Africa and is not the amount of “profit” you can make. So if you buy R1m worth of bitcoin in January from an exchange abroad, you will have to wait 12months before you can buy again.
This dispensation may be utilised solely at the discretion of the resident without any documentary evidence having to be produced to the Authorised Dealer except for travel purposes outside the Common Monetary Area where a passenger ticket needs to be produced. The resident individual must produce a valid green bar-coded South African Identity Document or Smart ID card for identification purposes and the identity number is mandatory when reporting the transaction in terms of the Reporting System.
Individual offshore investment allowance (R10m)
A tax-payer in good standing and over the age of 18 years, can invest up to R10 million in his/her name outside the Common Monetary Area (CMA-Lesotho, Swaziland and Namibia), per calendar year. A Tax Clearance Certificate (in respect of foreign investments) must be obtained. These funds may not be reinvested into the CMA countries thereby creating a loop structure or be re-introduced as a loan to a CMA resident.
So that’s R11m you can transfer abroad as long as your Tax affairs are in order. But what if you want to transfer R100m or a R1billion?
This is possible! Your bank must submit an application to the Financial Surveillance Department of the South African Reserve Bank for approval. A Tax Clearance Certificate, in the prescribed format, must always accompany the aforementioned application.
It is important that you understand that you are effectively importing and you will need to structure this as a business to be fully compliant.
How much can a South African company invest offshore?
South African companies (excluding Trusts and Close Corporations) can make bona fide new outward foreign direct investments into companies outside the Common Monetary Area (CMA – Lesotho, Swaziland and Namibia), up to R1 billion per company per calendar year through any bank.
What if I want to invest more than a R1 billion off shore?
The company’s bank will submit an application to the Financial Surveillance Department of the South African Reserve Bank, for approval. At least 10% of the foreign target entity’s voting rights must be obtained. (If you have R1b to invest, then you shouldn’t be looking for answers on the internet …. just saying)
VERY IMPORTANT! If you intend on trading bitcoin professionally, you should find a qualified, experienced and regulated financial advisor, preferably with an understanding of Bitcoin. (and make sure you pay them for their services – no good advice can come from braai chats :-). That would be the safest way for you to structure your business, make money and comply with regulations
Further reading of note: