Imminent reform of exchange control
28 January 2011
The Minister has taken the view that international co-operation and diversification is needed to achieve a more stable international financial environment. The Financial Surveillance Department of the South African Reserve Bank (“Fin Surv”) is shifting to a system of prudential regulation and gradual liberalisation in relation to exchange control.
The amendment to the exchange control and offshore investment limits on individuals relaxed the limits on foreign investments by private individuals in respect of their portfolio allowance (currently R4 million) by allowing private individuals to invest abroad on an annual rather than on a once-off limited basis. Private individuals who have always been restricted in investing abroad (for example private individuals who always wanted to invest in a town house abroad) have now been given the opportunity to do so.
The amounts previously allowed to be transferred abroad in relation to single discretionary allowances for private individuals for “domestic purposes” has also been increased. Authorised Dealers may allow resident natural persons, who are over the age of 18 years, to transfer monetary gifts, gift parcels and loans to non-resident natural persons and resident natural persons who are temporarily overseas, for up to R1 million and not R750 000 per annum, without the requirement of obtaining a tax clearance certificate. This increase also applies to maintenance transfers and donations to missionaries.
A further amendment is to inward foreign loans (borrowing abroad by a resident). The requirement that all loan applications, where commitment fees, raising fees and any other administrative fees are payable, must be referred to Fin Surv, has been amended. Residents can therefore refer their inward foreign loan applications to an Authorised Dealer and not Fin Surv, subject to the combined fees (commitment fees, raising fees etc) payable not exceeding the five percent cap.
Furthermore, the South African Reserve Bank has published an amendment to the Exchange Control regulations made under section 9 of the Currency and Exchanges Act, 1933, by inserting section 24 which deals with the granting of administrative relief. This section deals with any contravention of exchange control where unauthorised foreign assets were acquired at any time prior to 28 February 2010. This amendment therefore, allows the Treasury to authorise the regularisation of any breach of the regulations by allowing individuals who have contravened the regulations to disclose contraventions to the Treasury. The voluntary disclosure programme set out in section 24 provides parties with an opportunity to remedy a contravention of the regulations. The disclosure could result in the approval of the parties’ application for relief and the avoidance of any additional penalties.
Norton Rose South Africa (incorporated as Deneys Reitz Inc) joined Norton Rose Group on 1 June 2011.