Your Offshore Allowance Explained

The South African economy, like most of the world, is currently experiencing a slump. 

However, South Africa feels the effects of global economic pressure a lot faster than first-world economies that have stronger currencies and markets. 

This has many South African residents wanting to grow their investments making use of offshore opportunities to realise better returns on their capital. 

This begs the question of the legalities around offshore investment and the tax implications associated with it. 

We’ll answer all the pertinent questions you may have in this article where we’ll cover: 

• What is a single discretionary allowance (SDA)? 
• What is a foreign investment allowance (FIA)? 

• How can your SDA and FIA work to your advantage? 

Read on to learn more. 

What is Your Single Discretionary Allowance? 

Your single discretionary allowance or SDA is an amount that every South African resident over the age of 18 is allowed to make use of at their discretion. 

This amount is currently R1 million and can be used for the following: 

• Travel funds. 
• Study funds. 
• Donations to family members or other donations. 
• Gifts. 

• Loans. 
• Maintenance orders. 
• Foreign investments. 
• Charitable sponsorship. 
• Mission funding. 

• Crypto arbitrage. 
• Foreign card payments. 

The SDA is allocated once per calendar year. 

To use your SDA you don’t need to provide any proof other than your valid South African ID document, except in the case of travel where you’ll need to fill out some mandatory paperwork, TransferMe can assist you with this. 

Once your SDA has been used up for the current calendar year you need to wait until the next calendar year for your next SDA to be allocated. 

The TransferMe foreign exchange team is here to assist you with any questions you have regarding your offshore transfer. 

What is Your Foreign Investment Allowance? 

Your foreign investment allowance or FDA is an amount that you are allocated per calendar year over and above your SDA. 

The current FDA value is R10 million for South African residents over the age of 18. 

This money is allocated for foreign investment which includes actions such as property purchases abroad, investing funds over your R1 million SDA, and any transfers you may need to make over the value of your R1 million SDA. 

An important point to note is that these funds may not be transferred to another South African resident abroad unless you have consent from the SARB to do so. 

Making use of your FIA is a little more complicated than your SDA. 

You’ll need to get a tax clearance PIN so that your tax status can be verified, TransferMe is here to assist you with obtaining your tax clearance. You’ll also need to have a valid South African ID document and be over the age of 18 to make use of your FIA. 

What happens if you need to exceed your SDA and FIA? 

If you need to exceed your SDA and FIA allowance, which means that you need to send more than R11 million overseas in 1 calendar year, you’ll need consent from the SARB to do so. 

TransferMe will be able to assist you in applying to the SARB for permission and will need to supply a motivational letter to the SARB.  

This motivational letter will need to note the following: 

• How much do you want to transfer? 

• The reason for and details of your investment. 
• A tax clearance certificate. 

How do You Make good use of your SDA and FIA? 

With a total value of R11 million available to invest offshore every calendar year, South Africans will be able to invest abroad in a multitude of different ways. 

With sound financial investment advice, you’ll be able to move your funds offshore through TransferMe and grow your capital in a more favourable economic environment, whilst taking advantage of exchange rates in the long term. 

It’s essential to seek sound financial advice before making any investment decisions from an authorised, qualified financial adviser who deals with foreign exchange.