Buying property abroad is widely seen as a lifestyle or investment milestone, and it’s easy to see why. The idea of owning a beachfront apartment somewhere in Portugal, an investment property in the UK, or a retirement home in the US sounds exciting and fascinating. But finding the property is often the easy part – making the purchase is where things can get tricky.
Most South African buyers spend months researching, comparing and searching for the right property abroad to purchase or invest in. Yet, when they finally land one, they learn the headache that comes with making that purchase. Factors like exchange control regulations, tax clearance bottlenecks, and foreign exchange rate volatility can quickly turn an exciting venture into a complex administrative ordeal.
To navigate this process smoothly and protect your capital, here are 5 key factors that every South African real estate buyer or investor should keep in mind before making that large transfer:
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The paperwork begins long before the money moves
Signing on that dotted line may feel like crossing the finish line, in reality that’s actually the starting point. Moving capital offshore is not as simple as instructing your local bank to process an international payment to clear your online shopping cart.
South Africans purchasing property abroad must navigate a framework governed by both the South African Revenue Service (SARS) and the South African Reserve Bank (SARB), each with its own requirements and timelines. Put simply, there are two regulatory considerations every buyer needs to understand. For transfers above your Single Discretionary Allowance (SDA), SARS needs to confirm that your tax affairs are in order, while SARB’s exchange control framework determines how much capital can be moved offshore and which approvals are required.
For instance, if you’re approaching the final payment on a property in Portugal and the funds need to be transferred by a specific date, discovering that additional documentation or compliance requirements need to be met can put unnecessary pressure on the transaction. Understanding the requirements for your purchase from the outset can help you avoid delays and ensure the funds are ready when payment deadlines begin to loom.
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Understanding which allowance applies to your purchase
Once you understand the regulatory landscape, the next question to ask is: how much money needs to move offshore?
South African residents over the age of 18 can transfer up to R2 million per calendar year as per their Single Discretionary Allowance (SDA) which can be used for different purposes including foreign property purchases. However, overseas property can exceed that amount. When that occurs, the Foreign Investment Allowance (FIA) comes into play, which allows an additional R10 million per calendar year. To use it, you must obtain an Approval of International Transfers (AIT) from SARS.
The SDA process is straightforward and requires no approvals. You can request the transfer through your bank or authorised forex provider by presenting your ID. While the AIT process is a bit more complex, you must apply via SARS’ eFiling platform and provide your source of funds. SARS will then assess your tax compliance and available funds before approving the application; this generally operates on a 21-working-day service level.
If you are looking to exceed the R10 million FIA benchmark, your commercial bank must submit an application to the Financial Surveillance Department of the SARB for approval, and a printed SARS tax compliance status verification result must accompany the application. The size of the transfer, the destination, and the timing of the rightful application can all influence the process. The earlier buyers understand which allowance they will need to leverage, the smoother the purchase journey will be.
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Tax clearance is not the final step, it’s one of the first
Excitement can quickly turn into frustration when buyers realise that tax compliance is not something you only think about once the paperwork has been signed.
For transfers exceeding your R2 million SDA limit, securing an AIT tax clearance approval from SARS is mandatory. That means ensuring all local tax returns are up to date, gathering supporting documentation (such as bank statements, proof of source of funds, and asset statements), and applying for the necessary approvals well before settlement deadlines come into view.
What catches many people off guard is not the paperwork itself, but the assumption that everything can be finalised in a matter of days. When in reality, SARS compliance checks for international capital transfers can take several weeks if queries arise. The buyers who experience the least delays are usually those who began preparing their tax documentation months in advance, rather than waiting until the offer to purchase is signed.
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Market turbulence doesn’t pause for your property purchase
There is a clear gap of weeks between paying the initial required deposit and making a final settlement payment on property abroad. During that time, unpredictable exchange rates continue to fluctuate, regardless of where you are in your property journey.
Think of a scenario where one euro equals R19.50 when you sign an offer on a €300,000 apartment in Portugal, putting the purchase price at R5.85 million. Then, a political or economic shock causes the rand to weaken to R20.30 against the euro. Almost overnight, the cost of the property jumps up by more than R200 000; before you’ve even received the keys and without the property’s value changing by a single cent.
Transfer fees, exchange rate margins and intermediary banking charges can quickly add up too, increasing the overall cost of the transaction. While these expenses may seem insignificant in isolation, together they can materially affect the final amount that leaves your account. It’s critical for buyers to have a clear understanding not only of what the property costs, but also of what it will cost to get their money there.
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Finally, the asking price is never the final price
While market movements affect the base exchange rate, the provider you choose determines how much extra you pay on top of it. Most buyers budget carefully for the property’s purchase price, local transfer taxes, and attorney fees, but fail to anticipate the hidden costs embedded in traditional banking transfers.
Commercial banks often advertise nominal transfer fees, but silently build substantial profit margins into the exchange rate spread. These hidden margins, combined with intermediary banking fees, can significantly increase the total amount in rands required to settle the full purchase. Buyers need to ensure there is absolute clarity not only on the property’s purchase price, but on the exact exchange rate spread and transactional fees your chosen provider will charge to move your capital offshore.
So, where does the journey actually begin?
Not with the property search, the viewing or even the signed offer. It begins with understanding the journey your funds need to take. From navigating regulations and tax obligations to managing exchange rate movements and transfer costs, the most successful buyers already know that preparation starts long before the first payment leaves their account.
When making one of the biggest financial decisions in life, knowing how to move money is just as important as knowing where to invest it. The buyers who get it don’t make last-minute decisions; they ask all the right questions, seek trusted guidance and understand the process long before the first payment leaves their account.
- Harry Scherzer, CEO of Future Forex
