Thirdly, taxation in South Africa will be levied on income earned on foreign investments on the same basis as income earned in South Africa. (The taxation on “passive income” earned in foreign countries as referred to by the Minister in his Budget Speech.) Foreign investments will, however, hold new risk exposures for South African investors, particularly in an environment of volatile international exchange rates.
The timing of the transfer of an investment into a foreign currency can be detrimental. A South African investor who may have transferred his savings into a sterling investment earlier this year when the exchange rate between the rand and the pound was R8.00 = £ could have lost 10 per cent of his investment within a very short period of time.