Exchange Control Regulations
The term “exchange control” refers to the way in which the government of a country tries to control the movement of money into and out of the country. South Africa is not the only country in the world to have a system of legislated exchange control. However, relatively few countries operate such a system.
Every single transaction in South Africa that involves a movement of money into or out of the country is regulated by the exchange controls. There are no exceptions – it does not matter what the amount is, or who is involved in the transaction. The South African Reserve Bank (SARB) supervises the system of exchange controls, as well as all capital in and out flows. The SARB delegates some authority to local authorised dealers (usually the large commercial banks) who supervise transactions on their behalf.
Besides the banks, there are also currency trading companies, who still trade via authorised dealers such as banks, but are able to offer far better rates by means of bulk transfer processes, and also do not charge administration fees like the banks do.
Some of the most important information about exchange control regulations is given below.
* The regulations apply to ALL transactions, regardless of the amount or the parties involved
* No resident of South Africa is allowed to perform a transfer without obtaining prior approval
* No company or legal entity is allowed to perform a transfer without obtaining prior approval
* Only authorised dealers may perform a currency transfer
* Outward payments are only allowed to be made under certain conditions set out by the authorised dealers acting on behalf of the SARB
* Any payment made to a foreign party needs to be reported to the SARB
* There are regulations setting out specific limits on the permitted size of personal transfers
What implications do exchange control regulations have for me?
As an individual, the effect of exchange control regulations is to determine how much money you may transfer out of South Africa, and for what reason(s). The exchange control regulations apply only to South African residents, and not to citizens or permanent residence holders. If you are regarded as a resident for exchange control purposes, the regulations apply to you. Permanent residence can take on several different forms, so if you are unsure about this it is best to seek professional advice.
Circumstances under which one is permitted to transfer money abroad include the following.
* Gifts and loans of money
* Maintenance payments
* Donations to missionaries
* A study allowance
* A travel allowance
* A R4 million per annum individual capital allowance
In the case of companies, payments made to a foreign party are also governed by the regulations. Like private individuals, companies are also required to provide a justification for making the transfer, and can only make the transfer with the prior approval of the SARB or the authorised dealer, where the latter is authorised to provide such approval. The regulations govern all foreign payments and investments made by a company in South Africa, as well as any loan granted by a foreign investor to a resident of South Africa.
Exchange control regulations can be daunting to the uninitiated. Perhaps you are no comfortable with trying to assess a legalistic maze of unfamiliar terminology and convoluted language. However, there is help available. Try a dedicated currency exchange company. It may make a world of difference.