CAPE TOWN - It is common for travellers to buy foreign currency from an authorised dealer (AD), such as a bank or an authorised dealer in foreign exchange, to pay for the expenses they will incur abroad. However, it is important to keep in mind that, according to South Africa’s exchange control laws, there are rules regarding the use of such travel allowances.
This article highlights the most important rules of which South African residents should be aware.
General rules regarding the granting of travel allowances
All South Africans who are 18 years or older are entitled to use the single discretionary allowance (SDA). The SDA is R1 million per calendar year, which any South African resident may use for any legal purpose abroad, without obtaining a tax-clearance certificate.
South African residents who are under the age of 18 may be granted a maximum annual travel allowance of R200 000 per calendar year.
One of the legal purposes for which the SDA may be used is to take funds abroad in the form of travel allowances. From a practical perspective, this means that if, for example, you have used R100 000 of your SDA during any calendar year before going on your December holiday, you may, in principle, apply to take foreign currency up the value of R900 000 abroad.
It is important for you to keep track of the amount of your SDA that you have used in a calendar year, because exceeding your SDA will be a contravention of the regulations.
Travel allowances may be taken abroad in the form of foreign currency banknotes or travellers cheques, or may be transferred to the traveller’s own bank account or to the account of the traveller’s spouse, but not to a third party’s bank account.
Minors’ travel allowances may also be transferred to their parents’ bank accounts abroad.
Travellers may use their credit or debit cards to pay for travel expenses abroad, within their annual SDA limit.
Documentation and provision of foreign currency prior to travel
Where you want to use your SDA to buy foreign currency from an AD for travel outside the Common Monetary Area, which consists of Lesotho, Namibia, South Africa and Swaziland, you must produce your passenger tickets. In such instances, you may not be furnished with foreign currency more than 60 days before the date of departure, unless the funds are to be used for business travel or land arrangements. Land arrangements refer to expenses related to tours, hotel accommodation and vehicle rental that are made at the request of South African-resident travel agents or tour operators.
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When making use of your SDA to apply for a travel allowance, you must provide the AD with a written undertaking that you will:
- Travel within 60 days from the date of the request for foreign currency;
- Not purchase foreign currency from an AD in excess of the applicable limits;
- Offer for resale all foreign currency that you received in the event of the trip being cancelled, to an AD or an ADLA (authorised dealer in foreign exchange with limited authority, such as bureaux de change); and
- Will offer for resale to an AD or ADLA any unused foreign currency within 30 days of returning to South Africa.
Permissible use of travel allowances
You should be aware that any amounts taken or transferred abroad for purposes of travel may not be used for any other purpose.
Once you have returned to South Africa from overseas travel, you must resell any remaining foreign currency to an AD or ADLA within 30 days. From a practical perspective, this means that if you travel abroad with your family and have a foreign bank account, you may not deposit any unused portion of your travel allowance, or any of your family members’ travel allowances, into your foreign bank account and use it for investment purposes. Where any portion of an amount granted as a travel allowance is used for investment purposes in this manner, the funds and the growth on such funds will constitute an unauthorised asset held in contravention of South Africa’s exchange control laws. A South African resident may have to pay a fine on such assets, or worse, forfeit the unauthorised asset and face criminal prosecution.
Business travellers who go on a business trip within 90 days of returning to South Africa from a previous business trip may retain such foreign currency to use during the next business trip.
Where persons have returned to South Africa from travelling abroad and have resold the unused portion of their travel allowance to an AD or ADLA, as required, they may use such amount at a later stage during the calendar year, as part of their SDA.
Although it might seem that there is a lot to keep in mind when you apply for a travel allowance, it is not necessarily the case. In simple terms, the lessons are:
- Don’t exceed your R1m annual SDA limit when applying for a travel allowance;
- Don’t use any portion of your travel allowance for investment purposes abroad; and
- Resell any unused foreign currency to an AD or ADLA within 30 days of returning to South Africa, unless you fall within the business traveller exception discussed above.
As long as you keep these things in mind, there is not too much to worry about.
Louis Botha is an associate in the tax and exchange control practice at Cliffe Dekker Hofmyer. This is an edited version of an article that was originally published in the December 2017 edition of Without Prejudice.
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