A Leap Of Faith
by Andrew Duncan
Some time ago I wrote an article entitled “Exchange Control Coerces Immigration to Protect Nest Eggs” pointing out that many wealthy South Africans who would like to stay in the country, but want to secure a portion of their wealth offshore as a hedge against political and economic uncertainties, are being forced to consider emigration as a serious option.
One might be able to maintain contact with South Africa through occasional visits and online interactions while operating from an offshore base, but it could become tricky.
The essence of the various articles that I had previously written was that that Exchange Control was about to be abolished. The reason being that the real motive behind the Amnesty in 2004 and the recent VDP was to increase SARS tax receipts based on previously unknown offshore earnings. The deal implicit was that, as a South African resident, you can take your money where you want, but you have to pay tax on those earnings if you want to live in South Africa. The failure to abolish Exchange Control breaches this deal. Treasury is frustrated by this and as a result the Foreign Allowance has been constantly and dramatically increased to effectively bypass Exchange Control. The present approach is to increase the Foreign Allowance of R5m up to R200m without too much enquiry and even if you make it plain that you are thinking of emigrating.
This means you do not have to emigrate to get your assets out of the country. Reality has won through albeit with little fanfare that investor friendly countries allow their own residents to invest when and how they like subject to paying tax on their earnings which is a fair enough bargain!