Offshore Bank Account South Africa
Many South Africans have international transactional needs for business or personal reasons but are only aware of Customer Foreign Currency (CFC) accounts. These allow the account holder to manage foreign receipts and payments through their local bank but are subject to South Africa’s exchange control regulations.
Alternatively, an offshore bank account enables South African accountholders to make international payments, receive payments for work done outside South Africa and have access to their international funds in multiple currencies by way of a debit, credit or prepaid card. Funds held in an offshore bank account can be also transferred to a variety of different investment accounts, also based offshore.
Benefits of Offshore Banking
Asset protection: holding a portion of funds offshore can provide South African nationals with an extra layer of asset protection in the event of financial risks, creditors or legal actions that may arise at home.
Diversification: holding assets in different jurisdictions can provide investment diversification to your financial portfolio and foreign currency exposure to mitigate the risks from domestic economic instability or currency fluctuations.
Access to international markets: offshore bank accounts can provide access to global financial markets and a broader range of international investment opportunities than may be available domestically.
Stability: holding assets in countries with political stability and a strong rule of law can help protect wealth from potential risks in your home country.
Tax optimisation: offshore banks accounts can provide a more advantageous tax environment than domestic accounts, particularly where a favourable tax treaty is in place, which may help reduce your overall tax burden.
Security: offshore bank accounts may offer a greater level of privacy in respect of your personal information than a domestic account.
Automatic Exchange of Information
While there may be no tax liability in the foreign jurisdiction where the account is held, South African tax resident accountholders will generally still be taxable in South Africa in respect of any interest or capital gains earned on the account because South Africa imposes taxation on worldwide income.
South African tax residents are required to declare all income and assets in foreign accounts. The Common Reporting Standard (CRS) is a global information sharing regime designed to provide tax authorities with information regarding financial accounts held by local taxpayers outside of their country of tax residence. The account details, balances and interest earned will therefore automatically be shared with the South African Revenue Service (SARS).
Exchange Control Regulations
South Africa also has strict exchange control regulations that may limit the amount of money you can transfer from South Africa or hold in foreign currency. South African tax resident individuals over the age of 18 are permitted to transfer up to ZAR12 million in their name outside the Common Monetary Area (CMA) per calendar year.
This is comprised of the annual ZAR2 million Single Discretionary Allowance (SDA) and the annual ZAR10 million Foreign Investment Allowance (FIA). To be eligible to use the FIA, individuals are required to follow the SARS Approval for International Transfer (AIT) process. Transfers above the ZAR12 million ceiling require the Authorised Dealer to seek prior approval from the Financial Surveillance Department (FinSurv) of the South African Reserve Bank (SARB). It is essential to consult a tax advisor for guidance on complying with these obligations.
Important factors to consider
In opening an offshore bank account, there are a number of factors to bear in mind:
- Some international banks require significant minimum deposits.
- Foreign accounts often incur high service fees, monthly charges and transaction fees.
- Required documents will include proof of identity (typically your passport), proof of address and, in some cases, financial references.
- Some banks may require applicants to open an account in person, while others are comfortable to work through a licensed service provider like Sovereign, in which case, a face-to-face meeting will not be required.
- Some jurisdictions are identified as ‘high-risk third countries’ by organisations such as the Financial Action Task Force (FATF), which will require financial institutions to apply Enhanced Due Diligence (EDD) measures to all customers, both new and existing, who are established in those countries.
- Opening offshore bank accounts is becoming increasingly difficult due to international transparency and anti-money laundering initiatives. Many banks will only open accounts for clients that have been introduced by a recognised and licensed service provider that is on their ‘approved list’.
All banks now undertake increased due diligence – not just when opening accounts but also on a transactional basis. Account opening procedures differ widely between banks, sometimes even between different branches of the same bank. Applications can be complicated and, often, documents must be certified or notarised and translated.
The Sovereign Group has longstanding relationships with many banks worldwide, particularly in the jurisdictions where we have offices. It is strongly recommended that we assist with bank introductions and the preparation and submission of the necessary documentation. Generally, an account can be opened more quickly and on better terms at banks known to, and recommended by, Sovereign.
Please contact us if you have any questions or queries and your local representative will be in touch with you as soon as possible.
