Offshore Investing Considerations for SA Tax Residents

Ruvan J Grobler • October 29, 2024

 We remain positive on the South African equity market and the renewed positive sentiment driven by resilient earnings and political reform. The JSE (Johannesburg Stock Exchange) however, constitutes less than 1% of global stock markets. If your portfolio only consists of South African assets, your overall portfolio risk may be concentrated in region specific factors. You may also run the risk of losing out on opportunities not offered by local markets.

 

As we head towards the final quarter of the year, this may also serve as a reminder that your annual R1m discretionary allowance and the foreign capital allowance of up to R10m expires on 31 December 2024. It may also be a good time to capitalise on US Dollar weakness for long-term currency hedging.

 

What should you be careful of when investing directly offshore?

  • One of the risks in offshore investing is probate. Offshore probate refers to the process of applying for the right to deal with a deceased investor’s foreign assets and proving their will as a valid legal document in the foreign jurisdiction.
  • The second risk is situs tax that will be encountered in both the US and UK. Situs tax refers to the taxation of assets based on their location or situs. In other words, it is the jurisdiction where the property is located, or deemed to be located, that determines the taxation of that property.

 

What structures provide solutions?

  • Structures where the foreign assets are held by a local nominee company.
  • “Wrapped” structures like sinking funds or endowment policies.

 

Estate planning benefits?

It’s important to consider the estate planning benefits of using the correct structure. Normally structures that allow beneficiary nomination provides regulatory- and tax benefits. It can be useful in lowering estate related costs but also provide cash flow to beneficiaries before the estate is wound up.

 

The above considerations may also not be applicable to certain investors. There are structures for those investors who have ceased or are ceasing to be South African tax residents. It may also be suitable for the investor’s adult children living abroad (non-SA tax resident). Estate duty or the equivalent may be payable in their country of residence.

 

Ruvan J Grobler RFP™ (PGDip Financial Planning)

Should you withdraw your Pension and pay off your home?

By Francois Le Clus • May 28, 2025
Should you withdraw your Pension and pay off your home? It's perfectly normal to ask whether you should use your pension to pay off your home when leaving an employer. This decision involves weighing the tax on the withdrawal, the interest saved on your bond, the future growth of your pension fund, and the contributions needed to catch up. Example: Anne is 40 years old with a pension fund worth R3,500,000. She bought a home 10 years ago for R3,000,000 and bonded it over 20 years at an 11% interest rate, with monthly repayments of R30,965. After 10 years, her outstanding bond is R2,258,225. If she withdraws her pension, she’ll receive R2,408,300 after tax—enough to settle the bond and have some cash left over. By paying off the bond early: She saves R1,467,919 in interest. She frees up R30,965 in monthly cash flow. However, if she keeps the money invested, her pension could grow to R37,921,470 by age 65 (assuming 10% annual growth). To match this value after using her pension to pay off the bond, she’d need to invest R28,580 per month for the next 25 years. That’s R2,385 less than her current bond repayment, so she does save monthly—but only for the next 10 years. After that, she’s committed to investing R28,580/month for 25 years to break even.  Not everyone’s calculation is the same and there are endless amounts of permutations to this calculation, but it’s important to note that you need to consider all of these factors when making these crucial decisions.

GEWOONTES VIR GELUKKIGE AFTREDE

By Riaan Botha • May 28, 2025
Ons ontleed watter gewoontes meewerk om ’n gelukkige aftrede te verseker. Hierdie maand bespreek ons hoe om gesond te lewe tydens aftrede. Mediese kostes verhoog hoe ouer ons word. Die koste van ’n mediese fonds verhoog jaarliks met meer as die inflasiekoers en mediese uitgawes sal in die toekoms ’n al groter persentasie van ons persoonlike uitgawes vereis. Dit is daarom belangrik om so gesond as moontlik te leef. Hier is verskillende stappe wat gevolg kan word om gesond oud te word: Eet gesond. Moenie oorgewig wees nie. Word sterker deur oefeninge te doen wat jou spiermassa behou. Doen jaarliks mediese ondersoeke om te bepaal hoe gesond jy is. Beskerm jou gewrigte en beenstruktuur deur krag- en rek-oefeninge te doen. Verminder rook en alkohol-inname om jou kanse van kanker en ander siektes te beperk. Indien jy ’n familie-geskiedenis het van siektes soos kanker en hart-toestande. moet jy vir gereelde mediese toetse gaan om vroegtydig te bepaal of jy nie die siektes onder lede het nie. Verbeter jou liggaamsbalans deur oefeninge te doen soos om op een been te staan terwyl jy jou tande borsel. Hierdeur verseker jy dat jy nie gereeld jou liggaamsbalans verloor en val nie. Studies het bewys dat dit help om jou fisieke en geestelike gesondheid te behou deur sewe tot agt ure per nag te slaap. Hou jou brein-funksie of kognitiewe vermoë in ’n goeie toestand deur brein-oefeninge te doen, soos om nuwe stokperdjies te beoefen of memoriseringsoefeninge te doen. Volg ’n aktiewe sosiale lewe. Studies het getoon dat mense met ’n aktiewe sosiale lewe minder geheue-probleme ontwikkel. Hulle het ’n verminderde kans om eensaam te voel en depressief te word (Health Connection, Cooper, University Health Care, 9 September 2024).