If you’re preparing for a contract beyond the borders of South Africa, you’re probably thinking about any immunisations you may need, what clothes to pack, what your accommodation will be like, etc. The last thing on your mind may be your financial arrangements. Your credit and debit cards work abroad; you’re sorted. Or are you?
South Africa has much stricter rules governing the movement of its currency across its borders than many other countries have. The UK, for example, requires travellers to declare more than £10,000 (c. R173,000) in cash on their person when leaving the country (seriously – who carries that amount of cash?!) but places no restrictions on use of bank cards and credit cards when living abroad (though the practices of the banks themselves may vary). Consultnet knows of one consultant from the UK who has been in South Africa for nine years and still holds a UK bank account and uses the cards on it with impunity. Unfortunately, life is not so simple for the South African consultant working abroad.
The South African Reserve Bank (SARB), via its Exchange Control mechanism, controls the flow of funds out of the country. It makes a distinction between travellers merely on holiday or business travel and those living temporarily abroad, and the definition of ‘temporary’ is not black and white. ‘Temporary’ is not defined as a set or maximum length of time, but rather refers to living abroad, without having emigrated, for whatever reason. This is exactly the situation contractors are in. To confuse matters further, the SARB rules bear no resemblance to the Home Affairs regulations governing passports and visas.
Coming back to South Africa for regular visits has no bearing on SARB’s view of temporary residence abroad. In SARB’s eyes, if you earn foreign currency while physically abroad, even if you do so intermittently for short periods, you may be considered temporarily abroad.
Credit/debit card use while temporarily abroad
While the definition of ‘temporary’ seems to be somewhat subjective, the SARB rules are very clear on use of your South African credit and debit cards abroad. In the calendar year you leave South Africa you may, subject to prior approval, use your credit card up to and until 31 December of that year. You may not continue to use it the following year unless you are due to return to the country at the end of that year.
This means that the maximum time you can use your cards abroad is two years, if you leave at the beginning of January and intend to return by December of the following year…and you seek approval first. If your departure from SA is later in the year, you have less guaranteed time – only a few months – and less total time; and in this case you are also much more likely to need that prior approval for the second calendar year.
Here’s an example: you leave SA in September for a six-month contract in Ghana. You come home at Christmas and return to Ghana in January. Unless you have secured SARB’s approval to use your credit card for the duration of your contract (which expires in March of the second calendar year), you may find your card no longer works. Or more likely it will work, but you may face a stiff penalty. More on that later.
Ignorance is not bliss
We’re giving you this information because you cannot plead ignorance of the rules as your defense if you contravene them. Nor can you blame your bank if it sends a renewal card to your foreign address. Branch staff are often not trained in the details of the South African Exchange Control Rules as they apply to South Africans living abroad. It is your responsibility to make your situation known to SARB (and to SARS). Permission to use your cards is granted on a SARB letterhead and not your bank’s letterhead. Make sure you have filled in the correct forms and received the correct authorisation before you go.
Should you cancel your cards?
You don’t need to cancel your South African cards while you are abroad, and you may continue to use them legitimately for online purchases delivered to a South African address (for example for goods delivered to family remaining in South Africa). But unauthorised use of the cards while out of the country may result in a penalty fine.
Penalties for non-compliance
If you fail to notify SARB of your plans and continue to use your credit or debit cards into the second calendar year of your contract, you may face a SARB penalty as high as 40% of the irregular spend. The money you have spent irregularly abroad will have to be brought back into your South African bank account and transferred from foreign currency funds. So, you could wind up with two charges – the 40% penalty to SARB and a forex hit, if exchange rates have moved against you. If you realise you have made a genuine mistake (for example, you are reading this article and you are in the second year of a contract), it may be possible to rectify your mistake retrospectively, without the need to pay the full 40% penalty. But you must contact SARB immediately and not wait until you receive an enquiry letter from the Reserve Bank.
If in doubt, seek help
In the first instance talk to your employer. If they have seconded you to a foreign project or if they are based in a foreign country and have hired you as a cross-border contractor, they should have specialists on staff who can advise you. If not, there are firms who offer specialist tax and legal advice on cross-border financial regulations. Don’t get caught out. Make sure you know and abide by the rules.