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Going global: don’t get

caught in complexities

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Nick Jeffrey

Sanlam Trustees International

In tumultuous times, investing offshore is one way of ensuring a diversified investment portfolio to hedge against risk. For South Africans, it can be fraught with potential complications, however – not least of which are currency volatility and tax hurdles. Here’s what you need to know before going global.

South Africans invest offshore for a number of reasons – to protect their wealth from domestic political or economic risk, to gain access to specific markets and opportunities unavailable locally, or to diversify across multiple geographic locations and currencies. Without expert advice, however, it’s easy to get tripped up by the complexities that often accompany global investments, such as estate duty or inheritance tax, local restrictions on investing offshore and currency fluctuations. Factors to consider include:

South African estate tax: In SA, this tax is paid by the estate of the deceased in the form of estate duty. The beneficiary inheriting the funds generally has no liability to pay the tax, as the estate has already paid it. The estate duty rate is 20% on the dutiable amount of estates up to R30 million, and 25% for anything above R30 million.

Foreign inheritance tax (IHT): Most countries have their own inheritance and estate duties or taxes, and a South African resident owning a foreign asset may be subject to these. For example, the UK and US apply rates of up to 40% on assets located in these countries. Depending on whether an estate duty double taxation agreement is in force with SA, the rates levied in the foreign jurisdiction may be in addition to the SA estate duty. Where such an agreement is in force, the higher rate of the foreign jurisdiction will typically apply, with SA giving a credit against the SA estate duty payable, limited to the amount that would have been payable in SA.

Probate: This is the process in which a will is ‘proved’ in a court as a valid public document and accepted as the true last testament of the deceased. Probate will generally be required in the jurisdiction in which an asset is held. If the country in question doesn’t recognise a South African will or executor, this can be a time-consuming and costly affair. An offshore will is therefore sometimes required to simplify the process.

Foreign investment allowance: South Africans can use their annual foreign investment allowance to invest offshore (R10 million maximum per calendar year plus a further R1 million single discretionary allowance). The other ways of funding your offshore investment from SA are through authorised foreign assets, for example, foreign-earned income or foreign inheritance, or through an asset-swap facility (this is the ‘normal investment’ route mentioned under ‘funding mechanism’ in the table).

SA donations tax: Levied at a flat rate of 20% on the value of the property donated. However, donations exceeding R30 million are taxed at a rate of 25%. Section 56(1) of the Income Tax Act contains a list of exempt donations, including those between spouses, and donations to approved public benefit organisations. An annual exemption applies on the first R100 000 of property donated.

The four most common ways of investing offshore are:

  • Investing directly in a portfolio of equities, for example, the Sanlam Global Equity Diversified Portfolio
  • Investing in a foreign collective investment scheme (CIS or unit trust) for offshore funds, for example, the Sanlam Global High Quality Fund
  • Investing through an insurance wrapper, such as the Glacier Global Life Plan
  • Lending money to an offshore trust to make investments, for example, via Sanlam Trustees International.

This table compares the main aspects of each investment option:

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The table above sets out a high-level comparison. Since each situation is unique and there are many variables to be taken into account, it’s always advisable to work with your wealth manager to ensure all options are considered before implementing your offshore strategy.

At Sanlam Private Wealth, we can facilitate the seamless integration of your local and offshore estate planning – if you need further information, please don’t hesitate to contact me on

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