Back in the early 1990s, a student was writing his Oxbridge General Paper (Oxford and Cambridge Entry Examination). There was just one question typed on the paper:
What is Risk?
As the exam time started, other students in the exam hall immediately started writing with earnest, but our particular student, shall we call him Adam, just sat there, pontificating. The adjudicator looked at him curiously, but Adam was just sitting quietly thinking, not writing anything down. Then he wrote his name at the top of the paper, wrote down his preferred Oxford College, and wrote the question at the top of his paper. Adam looked up again, and met the eyes of the adjudicator. What was Adam playing at? Why wasn’t he answering the question? After all, he was one of the school’s brightest students. After a brief period, Adam wrote one solitary word on his exam paper, in the middle of the page: This.
He put his hand up and told the adjudicator that he had answered the question and finished his paper. The adjudicator was astonished! One week later, Adam was offered a full scholarship to Oxford!
Now you may ask: Why do I recount this story?
Relative risk and related reward are all part of any investment strategy, and if you have no exposure to currencies other than the South African rand, you’re limiting your investment potential. Risking one's own hard-earned money offshore can be a harrowing experience, but there are specialists out there to guide you through this process. With the recent relaxation of exchange controls for individuals, there’s no time like the present to diversify your currency exposure. Taking money offshore starts with the relatively easy process of using one’s R1m discretionary annual allowance to simply transfer funds to an offshore bank account. The documentation is minimal: some FICA requirements, and a Balance of Payments form from your bank. You can even transact with your local bank, though beware the margins that they may charge you on the exchange rate! The process usually takes a couple of days.
For higher amounts in addition to your discretionary annual allowance, it is possible to obtain an approval from SARS to send out up to R10m each year, using an offshore tax clearance. (This additional allowance used to be an annual R4m but was increased to R10m per person in the 2015 Budget). The FICA requirements and BoP form are the same, but approval needs then to be sought from SARS, and it’s probably best to do this through a registered tax practitioner. SARS additionally requires that you provide certain completed forms and proof of the money being in your own personal bank account, not the account of a company or trust. This whole process usually takes between a week or two before you can send the money offshore.
For those of you who are in a position to send out funds in excess of R10m each year, there is the opportunity to apply for a Special Clearance. This requires some patience, but ultimately one can take out whatever amount one stipulates, as long as there is sufficient justification for doing so. This process is rather more complicated and would definitely require a registered tax practitioner. As with any other tax clearance, all one's tax commitments have to be up to date, plus SARS may ask for additional details. Once approved by SARS, approval then also needs to be obtained from the South African Reserve Bank, but this is usually a fait accompli once SARB has approved the application.