Invest offshore
By expanding your investment horizon beyond our borders, you can potentially mitigate risks and tap into the broader global opportunities available in diverse economies.
Offshore Endowment
An offshore endowment is a tax-efficient investment vehicle suitable for investors looking to allocate significant amounts of money offshore, particularly those with high marginal tax rates.
It offers several key benefits, including the taxation of all income generated within the endowment at an effective rate of 30% and capital gains at an effective rate of 12%. The investor can retain individual interest and capital gains tax exemptions, simplifying tax administration and potentially reducing personal tax liability.
Additionally, offshore endowments provide advantages such as avoiding probate requirements, protecting against creditors, offering flexibility in underlying investment options, and providing tax-free withdrawals after an initial 5-year restricted term.
However, there are constraints to consider, including limitations on withdrawals during the first 5 years and contribution limits. In the event of death, beneficiaries can be nominated to receive the proceeds and no capital gains tax, income tax or executor's fees are applicable. However, the proceeds are still subject to estate duty.
Direct Offshore Investment Plan
The Direct Offshore Investment Plan allows South Africans to invest offshore, with an annual limit of R10 million subject to SARB tax clearance.
Investments up to R1 million per year can be made without tax clearance, but they must be registered with the SARB. The assets held in this plan are not subject to South African jurisdiction or authority.
However, there may be potential probate and inheritance tax issues to consider. Capital gains tax (CGT) is determined in the foreign currency, eliminating the impact of currency movements over the investment term.
It is important to consider foreign legislation and seek specialist fiduciary and tax planning services when utilising this plan.