The Financial Surveillance Department of the South African Reserve Bank issued a circular on the 4th of January 2021 lifting restrictions on so-called loop structures with effect from the 1st of January 2021. The rationale behind the liberalisation of our exchange control regulations is to encourage investment into South Africa and establishing South Africa as an investment and financial hub within Africa.

Loop Structure

A loop structure arises when a South African exchange control resident holds an investment in a foreign company (or other vehicle) which directly or indirectly owns shares or assets (including loan assets) in the Common Monetary Area (including South Africa). This restriction was partially relaxed in 2019 when South African exchange control resident individuals and companies have been allowed to acquire up to a 40% direct or indirect interest in an offshore vehicle that held South African assets.

The newly introduced complete relaxation of the loop structure prohibition will apply to all private individuals, companies and private equity funds which are tax resident in South Africa. The circular is silent as to whether this relaxation will apply to trusts; however, it is ultimately the appointment of a discretionary beneficiary (either a company or an individual) which creates the loop and not the foreign trust itself. It will be interesting to see if the any guidance will be issued on this issue.

Reporting Requirements

The obligation to report all inward investment to the Financial Surveillance Department will remain intact. It must be noted that any unauthorised must be regularised with the Financial Surveillance Department.

Tax Implications

The relaxation of the rules on loop structures will create certain tax planning opportunities as the current Income Tax Act (“ITA”) provides for certain exemptions on foreign dividends and the sale of foreign shares. The National Treasury published proposed amendments to the ITA on the 31st of July 2020 to reduce any tax planning opportunities that may arise by virtue of the relaxation of the exchange control regulations. We expect these proposed amendments to the ITA to take effect within the next couple of weeks and we will provide a detailed update on these changes shortly after publication.


The relaxation of the regulation on loop structures is a welcome regulatory change. We believe that it will enable South Africans to hedge their risk against political and economic risk in South Africa, whilst still having the opportunity to invest in South Africa.

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