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)

SA Trusts can now distribute to offshore trusts

By PJ Botha • September 4, 2025
For a long time, the South African Reserve Bank (SARB) prohibited money from being transferred directly from local trusts to offshore trusts. You may have had offshore exposure in your local trust through asset swops and other investment vehicles, but if you want to distribute to overseas beneficiaries, you must first withdraw funds from the trust and then transfer to them through the SARB. This recently changed. SARS declared that beginning August 1, 2023, it will evaluate and possibly approve petitions to transfer funds from South African trusts to offshore trusts. This adjustment coincides with the South African Reserve Bank's (SARB) recent relaxation of several currency control regulations. While this new alternative provides numerous prospects, there are tight criteria and a thorough application process. If you are an investor or trustee, you must understand these requirements. There is certainly no one-size-fits-all answer, and the drawbacks and benefits should be examined while deciding. Drawbacks: 1. Complex Regulatory Requirements. • Strict compliance required: The procedure is extensive, necessitating meticulous documentation and adherence to both SARS and SARB regulations. • Long approval process: Each application is assessed individually, which can take weeks or even months. 2. Cost • Legal, tax, and accounting assistance can be costly. • Administrative burden: Extensive documentation and regular reporting increase management time and expenses. 3. Tax obligations • The South African trust must pay all relevant taxes (capital gains, dividends, etc.) before distribution, preventing tax deferral to the recipient. Money held in a trust is often taxed at a higher rate than money held in the name of a company or individual. 4. Uncertainty and Evolving Practice • New regulations may impact future distributions and compliance needs. • Disputes: Failure to meet SARS or SARB rules may result in delayed or refused distributions. Benefits: 1. Global Wealth Diversification. Offshore trusts may provide superior asset protection during political or economic volatility in South Africa. 2. Succession and Estate Planning • Multi-Jurisdictional Estate Planning: This allows families with members living in different countries to structure their affairs more efficiently. • Offshore trusts facilitate the transfer of money to beneficiaries outside South Africa, simplifying inheritance processes. 3. Tax preparation • Offshore trusts can optimise worldwide tax positions with proper preparation and professional counsel, but must follow all applicable requirements. 4. Regulatory Clarity • Official Approval: SARS and SARB now provide clear protocols for trustees and investors, eliminating legal risks. The ability to transfer money from a South African trust to an offshore trust is a useful tool for global estate and investment planning. Professional guidance is essential to maximise benefits and avoid pitfalls.

AFGETREDENES EN MEDIESE KOSTES

By Riaan Botha • September 4, 2025
’n Nuwe denke oor ouderdom. ‘n Positiewe benadering oor verouderdom word gevorm as gevolg van die ontwikkeling van tegnologie en die mediese wetenskap. Statistieke wys dat die mens langer neem om te verouder en op ’n hoër ouderdom afsterf. Met veroudering word nuwe perspektiewe oor verhoudings met familie en vriende gevorm. ’n Groter dringendheid bestaan om beplanning uit te voer. Daar is ’n besef dat die tyd aanstap en dat elke oomblik geniet moet word. Die gewoonte om uit te stel en eers later belangrike momente in jou lewe te wil ervaar, verander. Daar is ’n besef dat die liggaam verouder maar dat die innerlike self steeds wil vernuwe. Laasgenoemde kan aangehelp word deur positiewe denke en gewoontes soos om terug te gee aan die plaaslike gemeenskap, om kennis te deel deur om te skryf of om onderrig te gee. Daar kan selfs oorweeg word om ’n nuwe vaardigheid aan te leer. Een van ons kliente wat ’n afgetrede predikant is, het na aftrede begin om klavierlesse te neem terwyl ander persone ’n nuwe plaaslike taal aangeleer het. Mediese kostes  Volgens Stats SA se verslag “Profile of older persons in SA” wat in 2023 gepubliseer is, het die gedeelte van die SA bevolking wat ouer as 60 jaar is, verhoog van 7,0% in 1996 tot 9,8% in 2022. Wanneer die bevolking per groep ontleed word, maak die 60 jaar en ouer gedeelte van die betrokke groep die volgende uit: Blankes ongeveer 29%, Indiërs/Asiate 16,5%, Kleurlinge 10,9% en Swartes 7,8%. Hiervan gebruik ongeveer 50% kroniese medisyne, 20% gebruik brille, 10% dra gehoortoestelle en 5% is in rolstoele.Hierdie ondersteunende toestelle is duur en word nie altyd ten volle deur mediese fondse betaal nie. Die verslag noem ook dat meer as 50% van persone ouer as 60 leef in huishoudings wat uitgebreide families huisves. Mediese uitgawes is seker een van die belangrikste items in ’n afgetredene se begroting. Dit is ’n ongelukkige verskynsel dat mediese kostes met ouderdom verhoog. Die koste van ’n mediese fonds verhoog jaarliks met 3% tot 5% meer as die inflasiekoers en sal ’n al groter persentasie van ons persoonlike uitgawes vereis. Om die regte mediese fonds volgens persoonlike mediese kondisies te kies, speel ’n belangrike rol om deurlopende mediese uitgawes te beperk. Gap Cover kan ’n belangrike rol speel wanneer mediese fondsvoordele nie al die werklike mediese uitgawes dek nie. ’n Versekeringsproduk wat sal uitbetaal wanneer een van die gevreesde siekte opgedoen word, kan ook help om onverwagte mediese uitgawes te dek. RIAAN BOTHA