What you need to know when RSUs or share options vest

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DUDUZILE RAMELA: We look now at what happens when the money you have been patiently waiting for materialises. Managing the process of repatriating offshore share award funds need not be cumbersome. You fully earned them.

Harry Scherzer is CEO of Future Forex. He joins us now for more. Thank you very much, Harry, for your time this morning. So your offshore share award has vested. In the event you sell your shares, where do the proceeds actually sit?

HARRY SCHERZER: Hello, Dudu. Great to chat to you this morning. It’s actually a little complicated, because when you sell your offshore shares, the company will have a dedicated account where the proceeds sit, and that will be with, for example, Fidelity.

But the problem is that as soon as you sell those shares, the South African government, in theory, wants you to return those funds to South Africa within 30 days. And so, if you do keep it offshore for more than 30 days, yes, it’s likely that the government would know about it, and Sars [South African Revenue Service] would know about it.

But, strictly speaking, you are supposed to bring it back.

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DUDUZILE RAMELA: Ah, okay. I was going to ask, when you say ‘in theory you return them in 30 days’, in practice what happens?

HARRY SCHERZER: In practice, a lot of people either don’t know this, and therefore keep it abroad without realising they’re doing anything wrong. And some people optionally don’t tell Sars about their offshore earnings.

But if we’re doing this by the book, the thing to do is, as soon as that happens, if you want to stay out of trouble you’re going to then return it within 30 days to South Africa.

And what’s important to know is that if the exchange rate isn’t favouring you at that time, there is actually a way to do that by bringing it into South Africa but letting it sit in what’s called an FCA account, which is a foreign currency account – and it can sit in dollars, in euros, in pounds, but within the South African borders. And that’s something that the government is okay with.

So you don’t necessarily need to convert to rands immediately, but you do need to actually move the funds.

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DUDUZILE RAMELA: Okay. Let’s continue with that theme of helping us to comply and helping us to stay legal. What documents prove where the money comes from?

HARRY SCHERZER: This is where it can be a little bit complex because on top of that you’re going to need to pay tax on the funds.

The South African government, even though the shares might be offshore, the South African government is going to want its piece of the pie if you’re a tax resident in South Africa. And that’s income tax. So one of the things you’ll need is an IRP5 to basically show what those funds were worth, and you’ll pay income tax on that.

Along with that you’re going to need other documents in order to bring the funds in and submit the correct balance of payments code – which is called the BoP code.

You can see how there’s actually quite a lot that goes into this, and where people go wrong is they think they should just sort of chat to their bank and bring the money in. But it can often cause delays or even have funds returned because things aren’t done the right way by the underlying person.

So for that reason we do suggesting using a specialist. Future Forex is one specialist, but there’re many such specialists that can actually help you with bringing funds into the country. Typically, they’ll not only be cheaper, but also more helpful than the bank in doing so.

Read:
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DUDUZILE RAMELA: Fair enough. Where the currency is concerned – maybe it’s in British pounds, it’s in dollars, et cetera – who converts the currency and at what cost?

HARRY SCHERZER: This is where it gets quite expensive if you get this wrong, because the mainstream banks will convert the funds for you and they’ll tell you that the cost is, I don’t know, somewhere between sort of R350 and R1 000 – which isn’t a huge amount of money. But what they don’t tell you is that where they’re really making their money is off the rate they give you.

So, let’s assume they’re taking a rate, which is 2% or 3% worse than the rates on Google, the actual exchange rate. You’ll end up getting fewer rands because of this. And if you’ve got a million rand worth of shares, that can be R20/30 000 less due to those fees.

These are not fees that are transparent. It’s not like the bank’s going to say to you, ‘Hey, this will cost you 20 grand or R30 grand.’ They’ll say it costs you R500 – but that’s only one layer of fees. The much more significant layer of fees is actually based on the margin, the spread.

So what it’s important to do is to really, really ensure that the rate you’re getting is close to the rate on Google – and significantly close –and doing a little bit of a comparison.

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But if you want to do the sort of easy way, not do a comparison between providers, typically speaking, as I said, the mainstream banks will be the ones that will charge the most because they’re the most convenient and they know that they’ve got a captive audience.

The most competitive providers will be external forex providers, like Future Forex and others. Those are typically the ones who have to win business from the banks and therefore have to be more competitive – and be more helpful in doing so.

So, if I’m bringing money into the country in any capacity, certainly for shares, it wouldn’t make sense to use the bank I’ve just used my whole life. I’d far sooner work with another provider who’s going to fight for me to get the best rate they can.

DUDUZILE RAMELA: Got you. So, you just got to apply yourself, be patient, because one, it’s Sars, two, it’s these hidden rates. It’ll pay off, I guess, eventually if you do it yourself and you just be patient and go with, as you say, service providers that would be more transparent.

Thank you very much, Harry, for your time this morning. Harry Scherzer is CEO of Future Forex.

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