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The question everyone is asking is: How do I get my mattress money abroad to invest offshore? A number of options are available.
Single discretionary allowance
Foreign investment allowance
Should you, for instance, wish to give them to another South African resident as a gift, you would need prior Reserve Bank consent or the funds would have to be repatriated back to SA.
Externalising more than R10m
Asset swap (investing in a rand-denominated offshore investment)
Investing via Investec’s offshore asset swap platform allows you to invest in hard currency without having to wait for a tax clearance to be issued. Once the tax clearance is issued, Investec can do a back-to-back transaction, which allows the investor to fully externalise their assets without suffering market or currency risk. There would no longer be the requirement for the funds to be repatriated back to SA.
Do you have to pay tax on the funds you externalised?
"Nothing is certain but death and taxes."
– Benjamin Franklin
An estate duty of 20% is levied on South African residents’ worldwide assets on death. This would include any offshore assets. Some countries may levy estate duties on certain types of assets within their territories. Where double taxation agreements are in place, a tax credit for foreign estate duties paid will be provided. Note that in the February 2018 Budget, it was announced that an estate duty levy of 25% would be applied on the value of estates in excess of R30m.
No matter the reason for investing offshore, structuring your investment affairs is critical. Investing offshore is more complex than local investing, so it's vital that you consult with both your tax and investment adviser, to assist you in finding a plan that works for your circumstances.
About the authors
Rene van Zyl
Joint-head, Investec Tax & Fiduciary
Rene completed her law degree at the University of Stellenbosch and is an Admitted Attorney of the High Court of South Africa. After completing her articles in Cape Town, she joined a multinational offshore trust company, gaining extensive experience in global estate planning and structuring for high net worth individuals, while obtaining her H-dip Tax through Thomas Jefferson School of Law in San Diego, California. Rene was responsible for local and offshore products and solutions at FNB Fiduciary before joining Investec Wealth and Investment as a Tax & Fiduciary specialist in July 2017. Rene has been instrumental in building the Tax and Fiduciary offering for Investec during the last two years, and she was the first founding member of the team. She was also the representative for Digital Assets in South Africa for STEP. She was rated in the Chambers HNW 2019 for professional advisors. Every year they carry out thousands of in-depth interviews with clients in order to assess the reputations and expertise of business lawyers worldwide. The qualities they look for (and which determine rankings) include technical legal ability, professional conduct, client service, commercial awareness/astuteness, diligence, commitment, and other qualities most valued by the client.
Joint-head, Investec Tax & Fiduciary
Lizzie is an admitted attorney, currently busy with her Masters in Taxation. She specialises in tax and cross-border planning and structuring. Lizzie has vast experience in the drafting of local and offshore wills, estate and succession planning, trust and company law, local and offshore trust and company administration, exchange control regulations, tax law and opinions, as well as cross-border structuring and planning. Before joining Investec, Lizzie worked as an associate at a global law firm specialising in tax and cross-border planning, and as a Client Relationship Manager in trust and fiduciary services.