Many South Africans are taking their money out of the country and investing their nest egg offshore. The benefits of investing abroad include investment diversification, global growth exposure, hedging against rand depreciation and the mitigation of SA's political and economic risks.

The question everyone is asking is: How do I get my mattress money abroad to invest offshore? A number of options are available.

Many clients ask us whether their SDA must be used to pay for their children’s tuition/university fees. Tuition/university fees do not form part of your SDA. This is a separate application which would be brought in order for payment to be made.

Funds sent offshore via either your SDA or FIA may remain abroad and be invested freely. There is no requirement for them to be repatriated back to SA. However, they would be subject to the restriction that they may not be made available to any other South African resident.

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.

Individuals wishing to externalise more than R10m, without having the requirement to bring back the funds on redemption, can do so. However, it is a more complicated application and you would need a special tax clearance, which could take up to a few months to be issued. In addition to this, there would be a number of restrictions on the funds, and annual reports would need to be compiled and submitted to the Reserve Bank.

Another way to externalise funds would be by investing in a rand-denominated offshore investment or via asset swap. Your capital would be invested offshore, giving you the global diversification and foreign currency exposure you're after. However, because your money does not physically leave SA, when you redeem your investment, all the funds would have to come back to SA and be converted to rands. Your funds would be invested offshore but not fully externalised. No tax clearance is needed to place these investments and they are not subject to the size limits, as with the SDA and FIA.

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.

South Africans are taxed on their worldwide income. Therefore, all investment income and returns earned on the funds that you have externalised would be taxed at your marginal tax rate. However, the tax system does allow exemptions for certain types of income. There are also double taxation agreements in place with many countries, which provide credit for foreign taxes paid.

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.