Moving your assets and funds offshore – what are the options?

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

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. 
 

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 an AIT tax clearance, which could take up to a few months to be issued. In addition to this you would need approval from the SA Reserve Bank (SARB) and annual reports would need to be compiled and submitted to SARB.
 

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 it would be held via asset swap, 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 the first R30m and 25% thereafter 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. 

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.