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Shaking off those old foreign exchange shackles
The removal of restrictions has made a big difference to the lives of ordinary South Africans, writes LUCIENNE FILD
Until the recent relaxation of exchange controls, SA residents lived under a plethora of annoying and limiting restrictions. For instance, if you wanted to send money to a needy relative overseas you were limited to the princely monthly sum of R200. If you were unfortunate enough to fall ill while holidaying abroad, your medical costs were not allowed to exceed R10 000. And any contravention of the restrictions put you at risk of spending time behind prison bars. Today, individuals are largely free from the shackles imposed by the Reserve Bank on everyday foreign currency transactions. A family of four (with two children aged 19 and 15) can take their annual holiday overseas in grand style on their new total annual travelling allowance of R320 000 (the previous limit was R240 000). In addition, the family can pay for other expenses incurred on their trip (such as unexpected medical costs) without fear of being hounded by the Reserve Bank. Most significantly, the family will soon be able to invest some of their wealth in foreign assets. From July 1 this year a one-off grant will be allowed to each individual to invest a limited amount overseas (the rand amount is still to be announced). Assuming this limit is R100 000 per individual, the family can send R300 000 abroad (father, mother and child over 18 each get R100 000). And this amount may be even higher if the family has obliging friends and relatives who don't take up the one-off offer in their own right (as will surely happen). The relaxed exchange control measures were broadly announced in the March budget, but many of the exact limits were not disclosed. The finer details of the new measures are now known and are highlighted in accounting firm Kessel Feinstein's latest issue of The Tax Line. The new allowances pertinent to the average South African are: Your allowances may be taken out in any form you like - cash, travellers cheques or credit cards (previously, the cash element was limited to 50%). In addition to this allowance, you can take out R2 000 in SA bank notes. The above allowances also apply to residents moving abroad temporarily. The following payments are some of those that are no longer subject to any limits: Ernest Mazansky, tax partner at Kessel Feinstein, points out that proper documentation must still be presented to your commercial bank to enable the bank to issue the foreign currency. This means that if you need foreign currency to pay for, say medical treatment overseas, you must present your commercial bank with an invoice or quote from an overseas medical facility stating how much it will cost before the bank can issue foreign currency. He says the lifting of foreign exchange controls gives commercial banks more authority.
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