EXCHANGE RATES
Moving Foreign Funds
Moving and Exchanging foreign
currency internationally
BY ANDREW RISSIK
Y
our reason for buying overseas property will
have a direct influence on everything from
your budget, how you move your funds to the
type of property you invest in.
You must also understand the value of local
currency and exchange rates. If you send money from
South Africa, you will need to consider local exchange
control regulations. Whilst an individual can now
send R10 million offshore for investment purposes,
South African Revenue Service (SARS) have yet to
adjust their systems to this recent relaxation. The
delays as a result can materially prejudice your ability
to complete a property purchase transaction resulting
in heavy penalties.
You must always bear in mind when investing
offshore the effect of currency fluctuations. Take for
instance a South African investor, who took a US$
based mortgage in 2011, and relied on his South
African income to service the shortfall between his
offshore rental income and the offshore mortgage
repayment. When the Rand weakened dramatically
against the Dollar, he found it difficult to make ends
meet.
The need for offshore finance and funding is a far
more challenging exercise, due to the fact that it will
be subject to international laws and based in a local
currency.
Once you have made the decision to invest abroad
it makes sense to open a local bank account. This
makes it far easier to receive rental income and pay
local taxes, legal fees and other property associated
costs. This must be considered as a crucial part of
your preparation. Any surplus income can then be
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Offshore Handbook 2016
easily managed in the foreign country. If you have a
substantial surplus and want to repatriate it to South
Africa this can easily be arranged, as opposed to
making several small payments.
You must be cautious around issues such as
property ownership, especially if there is debt that
exists on a property. For example, if a developer has
previously borrowed money to complete the work
and has not repaid this you, as the new owner, may
be liable to pay back the money owed.
Everyone’s tax circumstances are different, and
this is especially true in the internationally diverse
property market. Each country has its own unique
tax laws, which may require you to pay costs such as
stamp duty and transfer tax at the point of purchase.
These potential costs must also be factored into your
budget.
Whether you intend to relocate or develop an
international property investment portfolio, things
can go wrong. You will therefore need a suitable
exit strategy, as this will minimize the potential for
financial loss. Before you externalise funds from the
country after liquidating the investment, you need to
ensure you have paid all local takes.
You must always take investment advice from a
financial adviser who specialises in expat investments.
Sable Forex can cost effectively assist you to move
your money out of South Africa and between several
international jurisdictions.
RESOURCES
Sable Forex
www.reimag.co.za