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Immigration, emigration and exchange control: What you need to know
- 17 July 2017
- Individuals Tax
- Louis Botha
Important:
This article is based on tax law for the tax year ending 28 February 2018.
Author: Louis Botha (CDH)
In the globalised world we live in, it has become more common for persons to immigrate to and emigrate from their countries of birth. During 2014 for example, approximately 69,216 persons were issued with temporary residence permits by the South African government, while 4,136 persons received permanent residence permits, according to 2015 statistics released by Statistics South Africa. In 2016, Stats SA also released statistics indicating that for the period 2006 to 2016, the most emigrants left South Africa between 2011 and 2015.
From a legal perspective, there are a number of things to consider when a person immigrates to or emigrates from South Africa. One of the things to consider is the exchange control (Excon) rules that are applicable to such persons. South Africa’s Excon regime is governed by the Exchange Control Regulations, 1961 (Regulations) read with the Currency and Exchanges Manual for Authorised Dealers (AD Manual). The AD Manual came into effect on 1 August 2016 and was last amended on 17 April 2017. This article is not meant to be a detailed discussion of all the Excon rules that might be applicable, but does highlight the most important ones that should be taken into account.
Immigrants
In terms of the AD Manual, immigrants are defined as natural persons who emigrated from countries outside the Common Monetary Area (CMA) with the firm intention of taking up or having taken up permanent residence in South Africa. The CMA consists of Lesotho, Namibia, South Africa and Swaziland.
In terms of sB.5(B) of the AD Manual, upon arrival, immigrants are required to declare to an Authorised Dealer (AD), whether they possess foreign assets and, if so, give an undertaking that they will not place such foreign assets at the disposal of a third party normally resident in South Africa. New immigrants must in due course provide the AD with documentary evidence substantiating that they have been granted permanent residence in South Africa and should be regarded as immigrants with effect from the date of their arrival in South Africa. According to the AD Manual, an AD includes a person, in relation to any transaction in foreign exchange, that is authorised by the Financial Surveillance Department of the South African Reserve Bank (FinSurv), to deal in foreign exchange. According to s(A).2(A) of the AD Manual, there are currently 27 banks in South Africa that are authorised to act as ADs.
The benefit of making the declaration to an AD is that if an immigrant decides to leave South Africa within five years of the date of their immigration, they can retransfer or re-export all of their own assets that were introduced or imported during the five year period as long as they can also substantiate why they originally introduced or imported such assets. An immigrant will also be allowed to transfer assets abroad in excess of those imported or introduced in South Africa, provided they can satisfy the AD concerned that they will be leaving South Africa permanently and that the assets to be transferred are reasonable in relation to the growth resulting from such individual’s business or employment activities and/or is market related.
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This article first appeared on cliffedekkerhofmeyr.com