How to invest offshore to reduce risk and expand opportunities – Business Day (registration)

These investments require higher investment minimums. The investor must decide on the jurisdiction and fund currency. The investment must be authorised by the Bank and the investor’s foreign investment allowance applies.

Investors are allowed to take up to R11m offshore per calendar year. For amounts greater than R1m, investors will require a tax clearance from the South African Revenue Service and approval from the Bank. Only natural persons older than 18 years (not legal entities, trusts or firms) are entitled to use the foreign investment allowance.

Direct offshore investments will form part of your estate and you may be liable for estate duty in the jurisdiction in which you invest. Offshore endowment structures are useful for these investments as this will negate the need for probate or an offshore executor.

You may nominate beneficiaries, which means that at your death the investment can either continue offshore or will be paid out in foreign currency to the beneficiaries.

The two investment options are treated differently from a capital gains point of view. In the case of direct offshore investments the foreign loss or gain has to be calculated first before it is translated into rand.

Rand-denominated international investments are always reported in rand, so it is possible to have a capital gain where there has been no offshore asset growth and only a depreciation in the rand.

Like all financial decisions, offshore investments need to be tailored according to your needs. Factors that may play a role include the status of the investor (natural person or trust), family requirements (for example, you may have children living overseas you may want to visit, or if you are able to afford to leave children an inheritance, then it would make sense to base that inheritance in the currency where they are living) and the purpose of the investment (for example, whether you need to draw an income).

Engage an independent, fee-based certified financial planner who will focus on your best interests and provide impartial advice. If you do not have a certified financial planner, visit the website of the Financial Planning Institute on www.fpi.co.za to select one.

• Bezuidenhout is director and investment planner at Netto Invest (morne@netto.co.za).

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