More exchange, less control – Further amendments made to the Currency and Exchanges Manual for Authorised Dealers

The Authorised Dealer Manual must be read in conjunction with the Regulations. Following the announcement in the 2017 Budget Speech that certain requirements pertaining to exchange control would be relaxed, the South African Reserve Bank’s Financial Surveillance Department (FinSurv) released Exchange Control Circulars Nos. 7 and 8/2017, in terms of which the Authorised Dealers Manual was amended to give effect to these changes. We reported on these amendments in our Tax and Exchange Control Alert of 3 March 2017.

On 20 April 2017, FinSurv released Exchange Control Circular No. 9/2017 (Circular 9/2017), in which it announced further amendments to the Authorised Dealer Manual and other guideline documents. We discuss some of these amendments below.

Foreign bank accounts

In terms of section E.D of the Authorised Dealer Manual, ADs may approve requests by South African companies to open and operate foreign bank accounts, subject to certain conditions set out in section E.D(i). Circular 9/2017 points out that a new paragraph E.D(iv) has now been added to the Authorised Dealers Manual, which states that ADs may, where applicable, approve the extension of the authorities previously granted by FinSurv provided the conditions stipulated in section E.D(i) are strictly adhered to.

Licence agreements involving the local manufacture of goods

In terms of section B.3(E) of the Authorised Dealer Manual, royalties and fees payable to non-residents (related and unrelated parties) in respect of licence agreements involving the local manufacture of goods can only take place if certain criteria have been met. Previously, it was required, inter alia, that the Department of Trade and Industry (DTI) had to assess the licence agreement and forward its assessment to FinSurv for final consideration. An AD would then have to be satisfied that the payments fall within the terms of the relative agreement, and where applicable, that it complies with any conditions laid down in the authority granted by DTI and FinSurv. Prior to effecting payments, ADs would also need to view a copy of the approval letter from FinSurv. Following the amendment to the Authorised Dealer Manual, it is now no longer a requirement for FinSurv to approve the agreement. Only DTI needs to approve the agreement.

Miscellaneous transfers – Refunds

Prior to the amendment of the Authorised Dealer Manual, section B.14(J) of the Authorised Dealer Manual provided that ADs could only approve the payment of refunds, where it involved the following:

• payment by the South African Revenue Service (SARS) to non-residents;
• where a pension payment has been received from outside the Common Monetary Area (South Africa, Namibia, Lesotho and Swaziland) after the demise of a resident beneficiary; and
• where the refund was in respect of orders, tour reservations, registration fees, erroneous payments and overpayments by non-residents.

Paragraph B.14(J)(iv) has now been added and states that ADs may also approve the payment of refunds not exceeding a total value of R100,000 per calendar year due to non-residents involving related parties. However, the AD must be satisfied that the relevant transaction complies with the transfer pricing guidelines and that suitable documentary evidence is viewed in this regard.

Comment

From the perspective of businesses, the granting of additional powers to ADs and the reduced need for FinSurv approval under the circumstances referred to above, might be a positive development as it could make it easier to do business locally and abroad.