South African Exchange controls aim to restrict the buying and selling of a national currency or to preserve foreign currency reserves. These controls are imposed due to concerns about outward flows of currency, but they can also be imposed to restrict inward flows. When it comes to exchange control and foreign employment, two possible scenarios arise, which we consider below.
Scenario 1: working for a foreign employer from South Africa
Due to the increasing number of remote working opportunities, more South Africans are being employed remotely from South Africa by foreign employers. In these instances, the South African resident may be tempted to open a foreign bank account to receive and retain their remuneration payments offshore.
From an exchange control perspective, this is prohibited, and all foreign remuneration must be repatriated to South Africa within 30 days from the date of becoming entitled thereto. All amounts transferred in and out of South Africa are required to be categorised into a Balance of Payment (“BOP”) code, which allows the South African Reserve Bank to keep track of all payments. With regards to inward payments for remuneration, BOP code 830 may be used with a description detailing that it is in relation to remuneration from a foreign employer.
Scenario 2: working for a foreign employer from abroad
In other instances, the South African employee may be required to render their services temporarily from abroad. In these instances, any amounts paid into a foreign bank account in relation to those services rendered abroad may be retained offshore. Should these payments instead be made to the South African individual’s bank account, BOP code 303 should be used.
Each South African individual has a single discretionary allowance (“SDA”), which allows the individual to transfer R1 million from South Africa to a foreign jurisdiction annually. In certain instances, when a South African is abroad, they may be required to use their credit/debit cards in the foreign jurisdiction or to transfer funds from South Africa to sustain themselves. These amounts will fall into their SDA. Should their annual SDA amount be exceeded, a separate application will be required to be submitted to the South African Revenue Service in the form of an “Approval of International Transfers” application.
Conclusion
When working for a foreign employer, ensuring that South Africa’s exchange control regime is abided by is important. This requires that any remuneration is repatriated unless it relates to services rendered abroad. Where funds are repatriated, the correct BOP code categorisation must be used. If the incorrect BOP code is used, the bank may not release the funds or request additional information.
As the exchange control rules can often be complex and change regularly, it is important that you reach out to your advisors should you have any uncertainty.