Opening position

Clients often ask whether they can earn interest on USD, GBP, EUR or other foreign currency balances. The simple answer is: sometimes. The better answer is that it depends on the type of account, the bank, the jurisdiction and the client’s tax position.

Foreign currency is not one single product. A local foreign currency account, an offshore bank account, a call account and a fixed deposit can all be treated differently.

What affects whether interest is paid?

Some banks offer interest-bearing foreign currency products. Others may offer transactional foreign currency accounts that pay little or no interest. The rate may also depend on the currency, term, minimum balance and global interest rate environment.

A client also needs to understand whether the account is held locally or offshore, and whether the funds are resident, non-resident or offshore assets for reporting purposes.

Tax considerations

Interest earned on foreign currency balances may have tax consequences. South African tax residents are generally taxed on worldwide income, while non-residents may have different treatment depending on the source of the income and applicable rules.

The tax position should not be assumed. Clients holding meaningful balances should ask their tax adviser how the interest should be declared and whether any foreign withholding tax or reporting obligations apply.

Common misunderstandings

• “USD always earns more interest.” Not necessarily. The bank product and term matter.
• “If the account is offshore, SARS does not need to know.” South African tax residents may still have reporting obligations.
• “Interest is too small to matter.” Small amounts can still be reportable.
• “Foreign currency account” always means the same thing. It does not.

How Currency Assist helps

Currency Assist helps clients understand the forex side of holding, moving and converting foreign currency. We help clients consider how funds arrived, where they are held and how they may be transferred or repatriated.

Where tax treatment is involved, we encourage clients to obtain proper tax advice so that interest and account balances are declared correctly.

Compliance note

This article is educational content only. It should not be presented as tax, legal, banking or exchange control advice. Client circumstances differ and should be reviewed before any transaction is processed.