WHY AND HOW CAN YOU MOVE YOUR ASSETS OFFSHORE?
Offshore Structuring for South Africans: A Guide to Protecting and Growing Your Wealth
In this increasingly volatile world, from global concerns around the stock market and trade tariffs to local political turmoil and the see-sawing Rand, how can you gain more financial security as a South African?
One of the ways in which South Africans can reduce risk is to create a global structure to house their assets by moving them offshore. However, this can be complex, expensive, and difficult to navigate without a solid plan.
Globalisation creates a global stage which can be used not only to infiltrate other emerging economies, but to put structures in place to ensure efficient and effective business arrangements. Exposure to different countries, with different regulations and compliance requirements has opened more opportunities for South Africans to operate in other countries taking advantage of these differences to best suit their businesses, whilst still having a business presence in South Africa.
Why should you consider offshoring?
Moving assets offshore works particularly well for entrepreneurs with an offshore focus on your business operations. It is easier to scale operations globally where the business environment is stable, asset protection is enhanced and there are more vast business networks.
This does not necessarily mean that businesses will establish their operations offshore, but instead that they could establish a foreign entity to facilitate optimal tax and income flows.
What are looping structures
For many decades, South Africans have been able to take up to R11 million per individual per calendar year offshore, and more with Reserve Bank clearance. However, in 2020, South Africa’s Minister of Finance, Tito Mboweni, announced the Government’s plans to overhaul the country’s capital flow system. The first change came into effect in 2021 when looping structures were no longer prohibited.
In short, a looping structure is created when a South African resident owns a South African asset through an offshore structure; thus, ownership is via an entity based offshore, looping back into South Africa.
This was a powerful change because it meant that annual profits from an offshore investment can flow offshore in the form of dividends, whilst equity growth can also be realised offshore. In effect, there is a direct line from a local investment into a foreign structure. This is also efficient from a tax perspective in that dividends tax, estate duty and Capital Gains Tax (CGT) can often be optimised through these structures.
Further along the line, you may be wondering what financial stability will look like when you retire, and what your succession plan will be for your estate when you’re no longer around. An effective financial plan means taking into account where you’re at in life now – and where you’re going. This may incorporate one or more of the following factors located in our lifestyle financial planning diagram.
What trust changes enable these structures?
With changes to looping structure rules, the easing of Exchange Control continues. As of late 2023, SARS allows local trusts to distribute to foreign trusts, if the foreign trust is a beneficiary.
Offshore investing helps move assets off your personal balance sheet by placing them in an offshore trust where you’re a beneficiary—giving you access without ownership.
Which jurisdiction will work best?
When deciding where to set up an offshore structure, it is important to consider matters such as political stability, access to currency, good infrastructure, access to investment opportunities and an established framework. Places such as the Channel Islands, Isle of Man, Mauritius, Ireland, Cyprus, and the British Virgin Islands are popular as they tick most of those boxes. Another important consideration is to find a jurisdiction with a relatively low regulatory environment compared to South Africa, which is one of the most regulated countries in the world.
Consideration also needs to be given to the management company that will be establishing and running the structure, factoring in their costs. It is important to research the regulatory landscape, factoring in the location of the business operations. If customers are in Europe, it makes sense to set your trust up closer to Europe, whereas if they are in the Far East, Singapore may make more sense.
How do you remain compliant whilst establishing these structures?
The most common asset in a looping structure is shares in companies. When the investment comes from offshore, those shares must be endorsed by the South African Reserve Bank. In this way, there’s duality: the loop needs to be reported annually and the share endorsement needs to be obtained.
Through its expert partner network, Cornerstone is able to provide a full tax and regulatory opinion through a Transaction Structuring Memorandum. This is important because looping structures can be a complex new realm. We act as facilitators, making the regulatory aspects of this digestible and easy to implement.
What about control of assets?
When implementing these offshore trust owned structures, it is important to remember that the assets that have been externalized are no longer
yours as the trustees legally own and manage them, and offshore trustees must always be independent. This is intentional: if you try to control the assets too directly, it could create tax residency issues in South Africa due to the “place of effective management” rules.
So, will these independent trustees deny you access to your money? It’s possible, but highly unlikely. While it’s true that things happen — someone gets sick, needs more funds or mismanages expectations — this is rare. In most cases, trustees are there to protect the long-term interests of beneficiaries, not to be obstructive. Think of it as a legacy safety net: the trustees won’t let you use trust assets for something reckless — and that’s a good thing.
Should you work with a partner – or can you do it yourself?
Trying to invest offshore without guidance is risky, and managing an offshore structure is not something you can easily do yourself. You need proper offshore advisors, fiduciaries and investment managers – and remember that you can’t be your own trustee. Yes, getting help costs money — but not nearly as much as what it could cost if something goes wrong in a foreign country. Think of it as insurance against unpredictable events: this is about protection, not panic.
If you think an offshore structure may suit your needs, Cornerstone Financial Services Group can help you through the process. We work with several specialists —such as fiduciaries, tax professionals, legal advisors and investment managers – who will help you set up an offshore trust and walk the journey with you over the long term. For example, we’ll help you open the bank account, handle trustee communication, and walk you through the process. We guide you step by step, making it less overwhelming. You’ll get a full file and memory stick with all documentation, and we will follow up with you a year later to ensure reporting gets done. After all, investing offshore is a long-term exercise that should be reviewed annually, and your investment partners – such as us – should stay involved and understand your journey. That kind of service is rare and valuable.
We also work with reputable partners abroad who we know and trust, which makes a big difference. After all, you don’t want to Google your way through this: you want recommendations and relationships. It’s all about collaboration where you have a global team, a local team and a structuring specialist. When everyone’s aligned, the concept of an offshore trust is no longer as overwhelming.
While we are your expert partners in this journey, we also encourage self-education: read the legislation and empower yourself with knowledge before picking a partner you can trust. Our own site, for example, has plenty of educational content you can read to get informed about offshore trusts.
What does an offshore structure cost?
This depends on your goals, for example if you’re moving assets offshore for tax efficiency only or protecting assets due to country risk. Even if you don’t have millions, safeguarding your wealth could still make sense. The traditional guideline is around USD 1 million in investable assets. A standard offshore structure — such as a trust with a holding company — will cost about $10,000 to $14,000 per year, which includes the first year’s management fees.
Your long term partner in offshore wealth
Exchange control changes since 2021 were not introduced to make people rich or help them avoid tax—they were part of a strategy to bring money back into South Africa. So, these structures are not loopholes; they’re policy tools.
At Cornerstone Financial Services Group, we don’t simply set up structures for short-term gain: we look at structures that will help you with wealth creation, legacy planning, asset protection and alternative residency over the long term. By dealing with a company that will partner with you over the long term, we’ll make sure that you’re not just giving up your assets offshore: you’re giving them an even stronger foundation than you had before.
Ready to explore your offshore options?
Let us help you make your wealth work globally with the right structure and the right team. Contact Cornerstone Financial Services Group today for a consultation and take the first step toward long-term financial freedom.
SHARE THIS ARTICLE