How to use your offshore allowance to profit before the end of 2024

Many countries employ regulations that govern offshore financial transactions. South Africa is no different. As a South African, two of the most important concepts to understand are your Single Discretionary Allowance(SDA) and Foreign Investment Allowance (FIA). These allowances affect how much money you can invest overseas, as well as how you can invest it. Failure to adhere to these regulations could cost you a lot of money in fines.

So, if you are interested in investing overseas, here’s what these allowances mean for you…

The ins and outs of your SDA allowance…

Under South Africa’s exchange control laws, every citizen over 18 with a south African identity document may transfer up to R1 million overseas every year without needing a tax compliance status letter. This is known as your single discretionary allowance (SDA).

You can use your SDA…

• To invest and/or save in an offshore account.

• For travel expenses. This may include using your credit or debit card when overseas.

• For online purchases of goods denominated or sold in a foreign currency. However, if pay with your bank debit or credit card, it won’t form part of your SDA. On the other hand, if you pay via an international payment, then it may affect your SDA.

• To support yourself if you’re temporarily living overseas.

• To send a gift to family living in another country. However, any gift/donation over R100,000 will be taxed at 20%. If it’s under the R100k threshold, you won’t pay any tax.

• And if you ready my article last week there was a nifty way of using your SDA allowance to make a cool R10k in less than a month – you can reread the article here.

Now, it’s important to note that a “use-it-or-lose-it” policy applies to this allowance. In other words, you can’t roll over the allowance you didn’t use in the year.

For example, let’s say use R500,000 of SDA allowance in 2024 for whatever reason. The R500,000 you don’t use cannot be added to 2025 SDA allowance giving you a R1.5 million SDA. At the beginning of every year, the SDA resets at R1 million.

And remember, any payments or investments that exceed R1 million will require supporting documents. Failure to abide by this could result in a significant fine.

What happens if you need to move more than R1 million offshore?

That’s where your FIA comes in…

As with the SDA, every SA resident over the age of 18 years is entitled to a FIA of up to R10 million per calendar year.
This is commonly used for investment purposes such as buying offshore property.

Remember, though, using your FIA requires some admin. For example, you’ll need a tax clearance certificate from SARS. You’ll also need to acquire a tax compliance status (TCS) letter that contains your tax number and PIN. And of course, you must be in good standing with your tax affairs.

If by chance, you want to send more than R11 million (SDA +FIA) abroad, you must apply to the SARB for permission via your authorised dealer. Again, this process is not as straightforward as using your SDA.

In this case, you must supply a motivational letter to your authorised dealer which details the amount you’d like to transfer, tax clearance certificate, reasons and details of your investment.

You have less than two months to use your offshore allowance…

As I mentioned above, you have up until the end of the year to use your 2024 offshore allowance. As soon as January 2025 kicks-in, your allowance resets.

So, if you haven’t already used your R1 million offshore allowance, you can do so today and earn quick profits.

How?

With Crypto Arbitrage!

If you’re not familiar with crypto arbitrage, check out last week’s Money Morning article, where I explained everything you need to know and more importantly, how you can use your SDA to bank a quick R10k profit.