INTLTAX Welcomes R2m Allowance Boost To Streamline Offshore Investing

Previously, the single discretionary allowance stood at R1m per person, meaning that accessing overseas investment opportunities required navigating a slow and cumbersome AIT Tax Clearance process.

Now, each spouse can fully utilise the new R2m allowance, opening the door to simpler, faster offshore investing. Experts from the Institute for International Tax and Finance (INTLTAX) say this change removes a significant administrative hurdle for investors.

“Taxpayers must submit a formal application supported by extensive documentation, including proof of tax compliance, details of the proposed transfer, and supporting financial records. Processing times can extend for weeks and are frequently subject to additional queries and documentation requests.

"The AIT process often acts as a deterrent to legitimate offshore investment on account of friction and uncertainty rather than cost,” explains Michael Kransdorff, chief executive officer of INTLTAX.

By contrast, the single discretionary allowance requires no Sars pre-approval. A compliant taxpayer can instruct their bank to transfer up to R2m offshore in a calendar year without engaging Sars at all. For a couple each making use of their allowance, that means R4m per year invested abroad, cleanly and efficiently.

Allowance restores power

“The allowance was originally introduced at R500,000 in 2008 and increased to R1m in 2011, but was unchanged for almost 15 years. In real terms, the new R2m threshold largely restores the purchasing power of the original allowance, which was significantly eroded by inflation and currency depreciation," says Kransdorff.

Kransdorff points out that the increase is not a windfall but an overdue correction for South African families actively managing cross-border exposure, allowing for improved diversification and broader investment access.

“Offshore exposure reduces concentration risk in a small, emerging-market economy and expands access to global sectors underrepresented on the JSE, including technology, healthcare, infrastructure, international property, foreign currency bonds and alternative assets.”

Another benefit is currency protection. With the rand remaining vulnerable to domestic fiscal pressures and global risk sentiment, holding a portion of assets in hard currencies like dollars or euros provides a meaningful hedge against currency depreciation.

Beyond the immediate benefit to residents, Kransdorff is concerned about the continued disparity in treatment between residents and non-residents. “South Africans who cease tax residency are generally limited to only a once off of a R1m discretionary allowance in the year of emigration as opposed to the annual allowance for residents.

"In practice, this can create liquidity constraints for individuals who have formally exited the SA tax net but remain subject to exchange-control restrictions on their remaining South African assets,” he says.

“If the resident single discretionary allowance is increased to R2m to reflect economic reality, policymakers should clarify whether a corresponding adjustment will apply to non-residents as well. Failing to do so risks perpetuating an already inequitable framework.”

The doubling of the single discretionary allowance suggests a willingness to continue to liberalise the exchange control regime.

“However despite this positive move, South Africa continues to operate within a highly controlled exchange framework that is increasingly out of step with global capital mobility. Meaningful reform would require deeper simplification, certainty, and equal treatment across taxpayer categories,” concludes Kransdorff.