Our team will be on leave from 18 December 2019 to 6 Jan 2020. read more...

Latest South African press releases

Sunday, 08 June 2008 16:28

Exchange control coerces emigration to protect nest eggs

{pp}Exchange control restrictions on individuals are prompting many rich South Africans to consider seriously the option of emigrating to protect their wealth says fiscal specialist Andrew Duncan.

Current political and economic conditions in South Africa are prompting an increase in enquiries from South Africans about investing offshore and exploring the fine print of the Budget in which relaxations in offshore investments were made for financial institutions. “Unfortunately, the Budget made only minor concessions to high net-worth individuals—many of whom are entrepreneurs and creators of economic opportunities for others—wanting to invest offshore to protect their wealth,” says Duncan.

“For individuals the exchange control restrictions remain intact, save for an interesting shift in providing an additional R500 000 a year without a tax clearance relating to monetary gifts, loans, maintenance or a greater travel allowance.

This change means that an adult's allowance is increased from R160 000 to R500 000 a year with children limited to R160 000 per year each. “Self evidently this allowance can be used only for travel purposes and will no doubt be 'prudentially' scrutinised by the Financial Surveillance Department of the Reserve Bank for signs of abuse. The foreign allowance remains at R2 million per person and while residents were previously allowed to donate up to R30 000 a year, this has now been included under the R500 000 “catch-all” entitlement, except for Kruger Rands which remain remittable up to R30 000 a year.

Those emigrating can take up to R4 million per family, a container of personal assets up to R1 million plus the applicable travel allowance. The remaining blocked rand can be remitted subject to a levy of 10%, which may be changed if there is a substantial increase in demand. “Many wealthy South Africans who would like to stay in the country, but want to secure a portion of their wealth offshore as a hedge against political and economic uncertainties, are being forced to consider emigration as a serious option.

Some could maintain their contacts with South Africa through occasional visits and online interactions while operating from an offshore base,” says Duncan. “Because these people are unable to invest sufficiently offshore or hedge in any manner against the devaluation of the rand other than though foreign currency deposits with authorised foreign exchange dealers, their full-time focus on South Africa may be lost through their emigration.

“This is an unfortunate consequence of the failure of the Treasury to drop exchange control once and for all.” Cash bequests and proceeds of legacies and testamentary trusts due to non-resident beneficiaries provided the non-resident heir has formally emigrated can be remitted abroad. Different criteria apply to Intervivos Trusts.

If the founder or funder of the trust dies then the capital can be remitted without restriction to non-resident beneficiaries and emigrants. But, if a third party has funded the trust, only income earned on the capital can be sent offshore provided the funding is in place at least three years before the beneficiary emigrated. If the beneficiary was the third party funder of the trust and then emigrates, the capital cannot be remitted until the death of that emigrant beneficiary.

Contact Information:
Walkers Attorneys
Telephone: +27 21 464 1400
Fax: +27 21 462 2256

About Pressportal

MyPressportal is geared towards the South African Market only. A press release can have a huge impact on the marketing of your company, as many journalist use press releases to communicate new happenings from all types of companies and NGO's. MyPressportal is FREE. We do not plan not to make this a paid service. If you would like to know more about the system, please read the FAQ.