Blocked rand’s have been in existence in South Africa, in one form or another, since the 1960’s. A simple explanation is that blocked rand’s are terminology used for funds that official emigrants from South Africa were not allowed to transfer abroad when they emigrated, hence ‘blocked rand’s.
The good news is there has been a recent proposal to take away the limits of what emigrants may transfer, asset wise, out of South Africa, therefore allowing individuals in possession of blocked rand’s to now transfer them out. Please see more information here on releasing your blocked rand’s and transferring them out of South Africa.
Why were there blocked rand’s?
Blocked rands were introduced as a means of controlling the transfer of assets out of South Africa to limit damage to the balance of payments account.
By imposing limits on the amount South African emigrants could transfer abroad, it prevented a certain amount of assets leaving South Africa.
The amount available for transferring abroad has increased over the years and proposals were made in the Mid term budget of October 2010 to abolish blocked rand accounts altogether.
Currently the limits stands at :
- Investment Allowance – R10 million per adult per calender year.
- Discretionary Allowance – A further amount of to the value of R1 million rand per calender year per adult.
- Additional amounts – The Reserve Bank will consider transfers in excess of the above amounts by application.
Transfers that have been effected under Section 0 (point 6.1.1) of the Exchange Control Manual need to be deducted from the above allowances.
Where were blocked rand assets held?
Blocked rands have to be placed under the physical control of the Authorised Dealer concerned. For most emigrants this would have meant a bank.
What blocked rand’s could be used for? (extract from Reserve Bank publication)
- Investment in quoted South African securities, which must be restrictively endorsed and deposited with an Authorised Dealer and not released, except temporarily for switching purposes, without the approval of Exchange Control. The sale proceeds of any unquoted security sold may be invested into any security quoted on the JSE Securities Exchange South Africa. Any request to invest such funds into any other unquoted investment would require prior Exchange Control approval;
- Investment in unit certificates issued by certain approved companies, the certificates in respect of which must be deposited with an Authorised Dealer and only released for credit of the proceeds to the emigrant’s blocked account. The names of these companies are available at Authorised Dealers.
- Release to the emigrants concerned of up to R75 000 per family unit per calendar year at the rate of R3000 per day per adult and R1 500 per day per child under twelve years of age to cover their living expenses whilst visiting South Africa – any unused funds are to be recredited to the relative blocked account on departure;
- Release, against the production of documentary evidence, to a travel agency to cover the local payment of the emigrants’ fares in respect of subsequent travel direct to the Republic and/or return from the Republic direct to their new country of domicile;
- Payment of expenditure in connection with their emigration, e.g. packing and removal expenses, against the submission of documentary evidence;
- Payment to the South African tax authorities, against submission of the assessment of income tax on income earned prior to emigration;
- Payment direct to the institution concerned, against documentary evidence of tuition and boarding fees due to local schools and universities, in respect of children who have remained behind in the Republic or returned to complete their education;
- payment of rates and taxes on vacant stands (non- income earning) which form part of the emigrants’ blocked assets, against submission of the relative assessment;
- Payment of membership subscriptions and affiliation fees due to local clubs and medical, engineering and technical societies, against submission of documentary evidence;
- Payment of premiums on long term insurance policies (Life, Endowment and Retirement Annuity) in respect of contracts entered into prior to the departure of the emigrant, against submission of documentary evidence from the insurance company concerned, on the understanding that the proceeds of such policies would be blocked and not eligible for transfer;
- Maintenance payments to a local resident in terms of a court order, a copy of which must be submitted to substantiate the request;
- Payment of professional fees due to resident accountants, income tax consultants and attorneys in respect of services rendered in connection with the emigrant’s remaining local assets against submission of the relative account;
- Payment of hospital, doctors’ and dentists’ fees for medical/dental attention received by any member of the emigrant family unit in the Republic during a visit here, against submission of the relative accounts;
- Payment of brokerage and all other directly related charges levied on securities transactions;
- Release sufficient Blocked Rand to pay the local charges of winding up the South African estate of an emigrant, where the estate holds insufficient cash funds to pay such expenses, against submission of documentary evidence;
- Release Blocked Rand in respect of option monies payable by emigrants;
- Release Blocked Rand in respect of margin payments due to the SAFEX Clearing Company (Pty) Limited (SAFCOM) – any margin payments from SAFCOM are to be credited to the relative blocked account on receipt thereof;
- The proceeds of mortgage bonds and/or mortgage bond participations forming part of an emigrant’s blocked assets may be reinvested in further bonds and/or participations;
- Release of up to R100 000 per annum in respect of gifts, donations and maintenance to third parties resident in South Africa;
- Release of up to R100 000 per annum in respect of maintenance and alterations to fixed property which form part of the emigrants’ controlled assets against the submission of documentary evidence; and
- Payment of capital gains tax in respect of blocked assets sold subsequent to the date of emigration, provided that the asset(s) sold formed part of the emigrant’s blocked assets at the time of emigration.
- Requests for the release of blocked funds falling outside the parameters outlined above must be submitted to Exchange Control. Such applications must indicate the purpose for which funds are required and be well reasoned. Payments in respect of local disbursements are normally favourably considered.
Can you use the income from blocked rand’s?
Certain types of income could be transferred abroad and these include:
- Interest and profits;
- Income distributions from close corporations;
- Directors’ fees/close corporation members’ fees;
- Monthly pension payments – paid by registered pension funds only;
- Cash bonuses on insurance policies;
- Income received from a trust created in terms of a last will and testament;
- Income received from an inter vivos trust;
- Rentals on fixed property
- The difference between the purchase consideration and maturity value of quoted gilts.
To find out more about releasing your blocked rand’s contact Incompass on:
Send us an e-mail here or telephone us on:
Ph: Cape Town +27 (0) 21 424 2936
Ph: Johannesburg +27 (0) 11 234 4275