As the world becomes more interconnected, globalisation has made it easier than ever to diversify your wealth and reduce reliance on local markets. For South Africans, offshore structuring is no longer just a luxury, it’s a smart strategy for long-term financial resilience.
Whether you’re building liquidity through trusts, taking advantage of relaxed loop structure regulations, or shifting from resident to non-resident status for greater investment freedom, the global stage offers a wealth of opportunity.
So, where do you begin if you’re ready to think bigger than borders?
Benefit from an offshore investment portfolio for your business
When it comes to your business and its investments, having an offshore component can be a good way of maximising the returns on your profits. And, with the Rand continuing to depreciate, investing in foreign currencies such as the US Dollar or British Pound can compound this effect.
While it’s relatively easy to invest overseas in your personal capacity via an annual investment or discretionary allowance, it’s more complicated for South African businesses. If you’re a business owner looking to benefit from investing in a portfolio with offshore exposure, what options do you have?
Utilise a Loop Structure for Offshore Asset Ownership.
A South African resident sets up or holds shares in an offshore company, which then invests back into South African assets. This creates a “loop structure”, funds are externalised and reintroduced into South Africa via offshore ownership.
Previously restricted, these structures are now permitted (since 1 January 2021), provided the individual is fully tax compliant. It’s crucial to consider tax implications and reporting obligations, and professional advice is strongly recommended to ensure compliance.
Using Trusts to Create Offshore Liquidity and Unlock Global Wealth Opportunities.
A well-structured trust can be a powerful tool for creating liquidity and managing wealth, especially when combined with offshore planning. By housing income-generating assets or receiving contributions, the trust can accumulate capital outside of an individual’s estate, offering accessible cash for estate costs or family needs.
Once distributions are made to beneficiaries, individuals can use their discretionary allowances to move funds offshore. This strategy not only enhances liquidity but also diversifies wealth globally. Proper tax and compliance planning is essential to ensure the structure is both effective and efficient.
The Power of Non-Resident Status.
When a South African individual financially emigrates and changes their tax status from resident to non-resident, a new world of offshore investment flexibility opens up.
This status change can be a game changer for wealth planning, especially when looking to diversify assets globally. It’s essential to plan carefully and consult professionals to ensure compliance during the transition and to make the most of the opportunities available offshore.
As experts in the corporate and investment space, we’ll help you build a sound offshore investment portfolio using one or more of these strategies, allowing you to benefit from potentially higher returns.
