South African couples can now transfer up to R4-million offshore per year without Reserve Bank approval or a SARS tax clearance certificate, following this week’s Budget announcement that the single discretionary allowance has been doubled from R1-million to R2-million.
A married couple can now each utilise the full R2-million allowance, giving them a combined annual capacity of R4-million to invest offshore without requiring Reserve Bank approval or an Approval for International Transfer (AIT) Tax Clearance certificate from SARS.
According to the Institute for International Tax and Finance (INTLTAX), this distinction is critical, as the process to obtain the required AIT Tax Clearance certificate from SARS is often slow and administratively burdensome.
“Taxpayers must submit a formal application supported by extensive documentation, including proof of tax compliance, details of the proposed transfer, and supporting financial records. Processing times can extend for weeks and are frequently subject to additional queries and documentation requests. The AIT process often acts as a deterrent to legitimate offshore investment on account of friction and uncertainty rather than cost,” explains Michael Kransdorff, CEO of INTLTAX.
By contrast, the single discretionary allowance requires no SARS pre-approval. A compliant taxpayer can instruct their bank to transfer up to R2-million offshore in a calendar year without engaging SARS at all. For a couple each making use of their allowance, that means R4-million per year invested abroad, cleanly and efficiently.
“The allowance was originally introduced at R500 000 in 2008 and increased to R1-million in 2011, but was unchanged for almost 15 years. In real terms, the new R2-million threshold largely restores the purchasing power of the original allowance, which was significantly eroded by inflation and currency depreciation,” says Kransdorff.
He points out that the increase is not a windfall but an overdue correction for South African families actively managing cross-border exposure, allowing for improved diversification and broader investment access.
“Offshore exposure reduces concentration risk in a small, emerging-market economy and expands access to global sectors underrepresented on the JSE, including technology, healthcare, infrastructure, international property, foreign currency bonds and alternative assets.”
Another benefit is currency protection. With the rand remaining vulnerable to domestic fiscal pressures and global risk sentiment, holding a portion of assets in hard currencies like dollars or Euros provides a meaningful hedge against currency depreciation.
Beyond the immediate benefit to residents, Kransdorff is concerned about the continued disparity in treatment between residents and non-residents.
“South Africans who cease tax residency are generally limited to only a once off a R1-million discretionary allowance in the year of emigration as opposed to the annual allowance for residents. In practice, this can create liquidity constraints for individuals who have formally exited the South African tax net but remain subject to exchange control restrictions on their remaining South African assets,” says Kransdorff.
“If the resident single discretionary allowance is increased to R2-million to reflect economic reality, policymakers should clarify whether a corresponding adjustment will apply to non-residents as well. Failing to do so risks perpetuating an already inequitable framework.”
The doubling of the single discretionary allowance suggests a willingness to continue to liberalise the exchange control regime. “However despite this positive move, South Africa continues to operate within a highly controlled exchange framework that is increasingly out of step with global capital mobility. Meaningful reform would require deeper simplification, certainty, and equal treatment across taxpayer categories,” concludes Kransdorff.