Immigration, emigration and exchange control: What you need to know

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.

After five years of the date of their immigration, immigrants will be regarded as emigrants from South Africa and will qualify for the prescribed emigration facilities. There are also specific rules that apply to immigrants where they wish to make payments abroad.

Emigrants

Section B.2(J) of the AD Manual states that if a person is a South African resident for Excon purposes and intends to emigrate and take up permanent residence in another country (outside the CMA), they must apply before departure, in order to receive the facilities and benefits set out in the AD Manual.

All emigration applications must be accompanied by a duly completed Form MP336(b) signed by the applicant, together with a duly electronically completed “Tax Clearance Certificate – Emigration”. Where an emigrant’s remaining assets are declared on the Form MP336(b), the AD under whose administration the emigrant’s remaining assets are placed must notify all applicable parties of the emigrant’s status and ensure that any proceeds derived from such assets are credited to the emigrant’s capital account. The AD also has certain duties where the emigrant owned securities and financial instruments listed on the JSE Limited. 

At the time of emigration and after all an emigrant’s assets have been brought under the administration of an AD, the emigrant will be granted a number of facilities, including the following:

• In the case of a family unit, a foreign capital allowance of up to R20 million per calendar year will be available after all local liabilities have been provided for and a travel allowance applicable to each member of the family unit, on the basis of and subject to the prescribed limits;
• In the case of single persons, a foreign capital allowance of up to R10 million per calendar year will be available, after all local liabilities have been provided for and a travel allowance on the basis of and subject to the prescribed limit;
• The travel allowance referred to may only be granted once and not more than 60 days prior to the emigrant’s departure; and
• Foreign assets held by emigrants at the time of departure need not be deducted from the foreign capital allowance referred to above.

An emigrant may export household and personal effects, motor vehicles, caravans, trailers, motorcycles, stamps, coins and minted gold bars (excluding coins that are legal tender in South Africa) per family unit or single person within the overall insured value of R2 million under cover of a SARS Customs Declaration. Where a person wishes to export assets in excess of this value, they must apply to FinSurv for approval. If an emigrant has any assets remaining in South Africa at the time of their emigration, there are also specific provisions that will apply.

A person who has applied for emigration will be regarded as an emigrant from South Africa on the date on which permanent residence was granted in their new country of residence. If a South African Excon resident has been permanently outside the CMA for a period of more than five years, the person must, on completion of the necessary declaration and undertaking discussed above, be regarded by FinSurv as a new immigrant to South Africa.
The AD Manual also contains a section dealing with the requirements that are applicable where an emigrant receives income. Income is defined broadly for purposes of sB.3(B) of the AD Manual but includes, among others, income in the form of interest, profits, dividends, income distributions from close corporations, directors’ fees or members’ fees, income received from testamentary and inter vivos trusts, and rental income from fixed property.

Comment

The purpose of this article is merely to highlight the Excon considerations that a person should take into account if they decide to immigrate to or emigrate from South Africa. While some might perceive the formal process of immigrating or emigrating from an Excon perspective as cumbersome, one should keep in mind that there are benefits of doing things “by the book”, so to speak. It is important for immigrants and emigrants to also consider the tax and other legal consequences that could apply to their immigration or emigration.