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Offshore Investments

South Africa represents less than one percent of the world economy and restricting yourself to local investments means you will miss the opportunity to invest in some of the biggest and most successful businesses and markets in the world.

Offshore savings form an important part of a diversified portfolio, but it is important to ensure your offshore saving are structured correctly so that you do not overpay in tax and estate duties.

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Investonline’s Offshore Solutions

Investing offshore in Rands

You can invest into a local unit trust account in Rands and the money can be invested into offshore “feeder funds”. The investment will be based in South Africa but the underlying unit trust funds will invest directly into offshore assets.

This type of account is very easy to set up and money can be added or withdrawn at any time.  There are no offshore restrictions or SARS tax clearance required as the money is technically held in South Africa.

Tax efficiency:

Tax on income earned such as local interest and capital gains will be payable as per your marginal tax rate (18%-45%). Capital gains tax rate up to 18%.

Withdrawals:

Withdrawals can be made at any time and the money will reflect in your bank account in 5 business days.

Estate benefits:

No estate benefits, the investment will form part of your South African deceased estate upon your death.

Minimum investment:

R50,000

 

Direct offshore platform in hard currency

You can invest into an offshore unit trust account in foreign currency and the money can be invested into offshore unit trusts in

USD, GBP, EUR etc.

If the money is currently held in Rands, individuals can take up to R1million offshore per calendar year as a discretionary allowance.  Any additional amount above R1million will be subject to a SARS tax clearance being requested. Money can be withdrawn from the account at any time.

Tax efficiency:

Foreign income will be subject to SA income tax at your marginal rate of tax (18%-45%). Capital gains will be payable upon withdrawal or switching in the investment. Capital gains tax rate up to 18%.

Withdrawals:

Withdrawals can be made at any time and the money will reflect in your bank account in 15 business days.

Estate benefits:

No estate benefits, the investment will form part of your South African deceased estate upon your death.

Minimum investment:

$3,500

 

Direct offshore wrapper in hard currency

You can invest into an offshore “wrapper” in the Isle of Man which is an investment product with certain tax benefits and restrictions. The money can be invested into offshore unit trusts in USD, GBP, EUR etc.

If the money is currently held in Rands, individuals can take up to R1million offshore per calendar year as a discretionary allowance. Any additional amount above R1million will be subject to a SARS tax clearance being requested.  The “wrapper” has significant tax and estate advantages for high marginal tax payers.

Tax efficiency:

Tax will be paid by the institution on behalf of the investor.  Capital gains will be taxed at a flat rate of 12% upon withdrawal or switching in the investment.

Withdrawals:

Withdrawals can be made at any time but they are restricted in the 5-year restriction period, limited to the initial capital amount plus 5% compound interest.

Estate benefits:

You can nominate a beneficiary/ies on the account and the investment will transfer directly upon your death. No executors fees will apply. The investment will form part of your South African deceased estate.

Minimum investment:

$20,000

 

Key features of the offshore wrapper

Lower tax rate and liability

  • Capital Gains Tax will be 12% (versus 18% if directly offshore).
  • Income tax is 0% as all distributions are rolled up within the unit trust funds.
  • CGT is calculated in hard currency (thus not calculated on Rand depreciation).

Beneficiary nomination

  • You can nominate a beneficiary on the portfolio and hence there is no need for a foreign will. Your family will take ownership of the portfolio quickly and easily without having to wait for the estate to be wound up.
  • No need for Grant of Probate and consequently, foreign executor.
  • The saving on estate taxes can be as much as 40% (SITUS TAX) and 3.5% (local executor’s fees).
  • There is no Capital Gains Tax payable on death – Section 55 of the 8th schedule.

Tax administration/simplification

  • Platform is responsible for all tax reporting obligations.
  • Platform takes care of all tax calculations and payment to SARS.

Investonline’s Role

  • Investonline will critically assess your risk profile
  • Ensure you are invested in the appropriate risk-profiled portfolio
  • Select the right investments for your portfolio to achieve best risk-adjusted returns
  • Monitor your investment portfolio continually and recommend appropriate adjustments when necessary
  • Assist with a smooth investment account set up
  • Assist with all administrative queries, switches, withdrawals and additional contributions
  • We are available to discuss and strategise investment market dynamics

 

Further reading

Read our offshore FAQs for more information.


This is a specialist area of investing.
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