When we talk about exchange control or the exchange control policy, you must think of the various forms of controls and regulations that the Government imposes to monitor the outward and inward flow of capital in South Africa.
The South African Reserve Bank (“SARB”) is the applicable regulatory authority in this regard, and the Currency and Exchanges Act 9 of 1933 and the Exchange Control Regulations of 1961 are the applicable statutory legislation that needs to be considered.
It is important to note that when we refer to the outward and inward flow of capital within South Africa, the term “capital” should be interpreted broadly to include intellectual property. Consequently, all transactions pertaining to the expatriation of capital by a South African resident to a non-resident will require the prior approval of the National Treasury. Accordingly, this definition was confirmed in the case of Couve and another v Reddot International (Pty) Ltd 2004 (6) SA 425 (W).
Recognising the above, it is important to note that a wide discretion is also applied when interpreting the Exchange Control Regulation under 10(1)(c). The purpose behind it is to ensure that foreign currency loss through the transfer abroad of capital held in South Africa is prevented. It also serves to effectively control the movement of assets in and out of the country, amongst other things.
The important factor to consider is that if you intend to export capital out of the country due to any contemplated transaction, you need to ensure that you obtain the necessary prior approval from an authorised dealer or alternatively, the National Treasury. The manner in which it is done is set out in the Currency and Exchanges Manual for Authorised Dealers.
Failure to obtain such approval would result in the transaction falling foul of Regulation 10 (1)(c) and could in all likelihood render the transaction void ab initio. Furthermore, any person acting in contravention stands to be liable for a penalty in terms of the Exchange Control Regulation 22, which carries a penalty of a R250,000.00 fine and/or up to five years imprisonment.
Notwithstanding the above, there are two ways you can export capital out of South Africa. This can be done by using your single discretionary allowance of up to R1 million and/or the individual foreign capital allowance of up to R10 million. The SARB confirmed that your local authorised dealer would be able to assist with these allowances.
It is essential to ensure that you receive the appropriate tax and legal advice when making this decision in respect of any contemplated transaction, especially in circumstances where you are not entirely sure.
With that said, please do not hesitate to contact BBP Law Attorneys. We will gladly schedule a meeting and provide you with the necessary legal assistance and guidance required.