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Going global: Navigating the complexities

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Investing offshore has always been a hot topic for South Africans — to protect wealth from domestic political or economic risk, to gain access to markets and opportunities unavailable locally, or to diversify across multiple geographic locations and currencies. 

There are different ways of accessing the global market. The simplest way is to invest in rand-denominated options such as dual-listed or rand hedge companies on the JSE, or local feeder funds providing access to offshore versions of these funds. 

Many South Africans prefer to invest directly offshore by owning hard currency assets, however. If your clients aren’t restricted by the South African Reserve Bank or South African Revenue Service from holding direct offshore assets, they can use their R10-million foreign investment allowance and their R1-million single discretionary allowance per year to transfer their after-tax funds abroad. Alternatively, if they don’t have the required regulatory approval or wish to invest more than their annual allowances, they can make use of the asset swap capacity of a financial services provider such as Sanlam Private Wealth.

If your clients are going the direct route, it’s essential they obtain expert advice to ensure they don’t get tripped up by the complexities that often accompany global investments. These could include complications around estate duty or inheritance tax, donations tax, local legislation and restrictions on investing offshore, and the overall effect of currency fluctuations. 

Key factors to consider include:

  • The most appropriate structure. The most common ways of structuring a global investment strategy are investing directly in a client’s own name, integrating assets into a life insurance policy (often referred to as a “wrapper”) or lending money to an offshore trust to make investments. 
  • Setup and administration of offshore trusts and company structures. Offshore trusts and company structures remain a popular option for asset protection, tax relief and estate planning purposes. However, setting up and managing these structures can be costly and complex. 
  • Global life insurance solutions. Investing through an insurance wrapper offers flexible investment options and some tax efficiencies, and your client’s estate won’t have to pay executors’ fees. 
  • A joint tenancy arrangement. In certain instances, it might be a cost-effective solution to invest directly in your own name with a joint tenancy arrangement. However, given the potential complexities, it may be a less flexible option.
  • Local and offshore tax advice and structuring. Factors to take into account include local and offshore taxes, and South African Reserve Bank regulations.
  • Global estate planning. To ensure the orderly transfer of assets to the next generation, it’s important to consider:
  • Local and offshore inheritance taxes
  • Drafting and reviewing of local and offshore wills
  • Safekeeping of deeds of title, and original trust documents and share certificates 
  • Executorships
  • Power of attorney to administer offshore estates.
  • Global asset management. Your clients will need an investment team with strong global asset management capabilities to ensure optimal long-term growth and preservation of their offshore assets.

At Sanlam Private Wealth, we have all the key skills to assist your clients on their offshore investment journey, from start to finish. We can provide world-class advice and integrated onshore-offshore wealth management solutions.

Should you need further information, please email Nick Jeffery at [email protected]

— Nick Jeffrey is Relationship Manager at Sanlam Private Wealth

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