South African Medium-Term Budget Update
| 4 November 2010 | ||
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South African Finance Minister Pravin Gordhan announced further Exchange Control Relaxations during his Medium-Term Budget speech on Wednesday 27 October 2010. The most important announcements relevant to our industry were those relating to the relaxation of the current Exchange Control measures. The main features included: |
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| • A proposed increase of the annual investment allowance from the previous once off maximum of R4mil per individual to an R4 million annual allowance. This, in simple terms does away with Exchange Control for most individuals wanting to diversify their investment portfolios on a global basis, | ||
| • A proposal that offshore investments by individuals (including but not limited to offshore properties) in excess of the R4million annual allowance, may be made subject to the Financial Surveillance Department’s approval being obtained, | ||
| • The annual discretionary allowance of R750,00 will be increased to R1million, | ||
| • A proposal that the 10% exit levy for emigrants with blocked funds will be abolished, and | ||
| • International headquarter companies (“IHC’s”) based in South Africa will be allowed to "raise and deploy capital offshore without Exchange Control approval" as from 1 January 2011. This is welcome news and in line with the new tax regime introduced for IHC;’s in the Second Taxation Laws Amendment Act, which are broadly the following: | ||
| o Controlled foreign company rules do not to apply to these companies, | ||
| o No STC (or new Dividends Tax) for the IHC, and | ||
| o Thin Capitalisation rules are excluded where debt is passed on to a foreign investor. | ||
| These welcome provisions will hopefully make South Africa a very favourable jurisdiction for these types of companies. | ||
| It is important to point out that the implementation framework for the above proposed Exchange Control changes is still unknown and we will update you in respect of any new information as soon as it becomes available. | ||