Smart money moves: How to lessen the impact of tax on your offshore investments in South Africa

Investing offshore from South Africa offers a variety of benefits, from diversifying your portfolio to hedging against currency fluctuations. But for South African investors, the tax implications can feel like a murky swamp. Although you can’t stop the South African Revenue Service (SARS) from expecting their cut, you can lessen the impact of tax on your offshore investments in other smart ways.

Diversify and conquer: why should you invest offshore from South Africa?

South African investment experts agree: venturing beyond our borders is essential for building and maintaining a healthy investment portfolio. Together, a weak Rand, sluggish economy, and lackluster JSE performance have the effect of limiting purely local investments. As Allan Gray’s 2022 report highlighted, putting all your eggs into a basket of purely South African equities could cost you 8% annually compared to an investment basket that was globally diverse.

But the benefits of going offshore with your investments extend far beyond returns. By investing offshore, you’ll gain valuable diversification, unlocking new investment opportunities and the relative stability of more established markets. However, remember: taxation plays a role when investing overseas from South Africa.

Tax on offshore investments in South Africa

While diversifying with offshore investments offers undeniable benefits, understanding the tax implications of your money moves important. Here’s the breakdown:

• Dividends: Shares in foreign companies attract dividend tax which is levied at a maximum of 20%.
• Beyond dividends: Interest earned on foreign accounts or offshore investment accounts, Real Estate Investment Trusts, and capital gains all come with additional tax considerations.

The good news? Smart planning can soften the blow when sending your hard-earned money out for investment and bringing returns back.

Read more: Expat tax matters: is foreign dividend income exempt in South Africa?

How to invest offshore from South Africa

As a South African tax resident, you have two exchange control allowances through which you can invest money offshore to the tune of R11 million. The Single Discretionary Allowance is good for up to R1 million per annum, without requiring prior tax clearance, while the Foreign Investment Allowance is good for moving up to R10 million for investment purposes, once you’ve obtained clearance from SARS.

Read more: What supporting documents does SARS require with the Approval of International Transfers (AIT) application?

Should you invest offshore using your bank?

Gone are the days when offshore investing was reserved for the privileged few. Today, a growing number of South Africans are taking a DIY approach to investing overseas from South Africa, seeking control over their investments beyond the confines of traditional institutions. While banks offer options like UK bank accounts or assistance with offshore accounts opened abroad, taking these routes can feel more like navigating a maze than a smooth journey.

Read more: Offshore bank accounts for South African citizens: An overview of benefits and considerations.

Here’s why the “easy” offshore investment route through certain banks can become a frustrating ordeal:

1. DIY clash with bank processes: Want to move money for offshore investments? Some banking online platforms often fall short, forcing you to rely on their contact centres for every transaction. Having to make phone calls to move some money around? Euuw, no thanks! This can be a time-consuming nightmare that turns a quick process into a weeks-long saga.
2. Hidden fees drain your returns: Banks rarely boast about their fees, and transparency isn’t their forte. There’s a reason for this. These hidden charges quickly add up, and can eat away at your investment funds, leaving you with less to invest on the outgoing, and reduced returns when you cash out.
3. Limited investment options: Banks often offer pre-packaged investment products, restricting your choice and potentially hindering your ability to tailor your portfolio to your specific goals.

So, should you abandon the bank route altogether? Not necessarily. As long as you’re prepared to do your homework on your choices and their charges, you can make it work. However, you also have other options when it comes to investing overseas from South Africa:

• Specialised foreign exchange platforms: These platforms offer competitive rates and transparent fees, streamlining your money transfers.
• Independent financial advisors: They can guide you through the complexities, navigate regulations, and offer a wider range of investment options.

Remember, knowledge is power. By understanding the limitations of banks and exploring alternative solutions, you can embark on your DIY offshore investment journey with confidence, maximising your returns and minimising the impact of hidden fees and cumbersome processes.

Read more: How to open an offshore bank account to transfer funds abroad from South Africa.

How to invest offshore from South Africa, smartly

Unlike the predictability of taxes, bank fee structures often lack transparency, leaving investors guessing how much each transaction will cost. This unpredictability cripples budgeting and prevents savvy planning. So how do you get around this, when investing offshore from South Africa?

You can transform your South African offshore investment experience by choosing forex providers that focus on transparency and customer service.

• Dedicated account managers: Imagine a personal forex specialist handling your entire process, eliminating the call centre maze and ensuring seamless transactions.
• Lower costs, higher returns: Competitive rates and transparent fees translate to more money invested and, ultimately, higher returns.
• Compliance, simplified: Handling your overseas investing from South Africa has a number of regulatory aspects, such as exchange control and tax compliance. The right provider will offer this compliance support and expert guidance as part of their service.

In today’s South African offshore investment landscape, every edge counts, so empower yourself with a transparent forex provider. Unmask hidden fees, streamline your transactions, simplify your compliance and maximise your offshore returns – one informed decision at a time.

FinGlobal: Unlock your offshore potential with a trusted partner

Investing offshore from South Africa opens doors to exciting opportunities, but mastering the complexities can feel overwhelming. That’s where FinGlobal steps in, becoming your trusted partner on your financial journey, offering:

• Tailored solutions: We understand every client is unique. FinGlobal goes beyond generic offerings, crafting personalised strategies aligned with your specific goals and circumstances.
• Maximised value: Enjoy optimal payouts faster than other providers, thanks to our competitive exchange rates that surpass what commercial banks offer.
• Unmatched expertise: Our team boasts certified professionals across finance, law, accounting, tax, and banking, ensuring you receive expert guidance in every aspect of your cross-border transactions. All services are fully compliant for peace of mind.
• Seamless convenience: Access all our services remotely, with the entire process handled on your behalf. We provide signature-ready documentation, saving you time and effort.
• Complete transparency: No hidden fees, no surprise charges. Just value-for-money service.

Explore FinGlobal’s full suite of cross-border financial services and discover how our tailored approach, competitive rates, and unwavering commitment to customer service and compliance can empower your financial success.

Contact us today and embark on your offshore investment journey with confidence!