Investing in international markets can be a great way to grow wealth and protect yourself from economic downturns at home. You can reduce risk and earn higher returns by spreading your money across different countries. But it’s not always smooth sailing. Unfortunately, many countries are making it harder for investors to move their money across borders. Strict tax rules, complicated regulations, and even political instability can make finding your way in the global investment landscape challenging. It’s like sailing the seven seas without a map or a compass. You could get lost or run aground on a rocky shore.
So, what can you do to protect your investments? Let’s take a look.
Best offshore investments from South Africa
The best advice when investing offshore is to seek professional help. A financial advisor specialising in international investing can guide you through the maze of rules and regulations. They can help you to:
- Identify promising investment opportunities in different countries
- Assess the political and economic risks of each market
- Minimise your tax burden through legal strategies
- Protect your assets from currency fluctuations and other risks
Working with an expert can increase your chances of success and reduce your exposure to unnecessary risks when making offshore investments from South Africa. Remember, knowledge is power. So, research, seek professional advice, and make informed decisions about your international investments.
Investing offshore from SA – think global diversification first.
Are you thinking about investing outside of South Africa? It’s a smart move! Just like you wouldn’t put all your eggs in one basket, it’s wise to spread your investments across different countries and markets.
Here’s why global diversification is a smart move:
- Reduced risk: By investing in various markets, you’re less vulnerable to the ups and downs of a single economy.
- Access to global growth: You can tap into the growth potential of emerging markets and established economies worldwide.
- Currency diversification: Investing in different currencies can protect you from the fluctuating performance of the Rand.
How does it work? Instead of only investing in South African companies, you’re spreading your money globally. For example, if you only invest in South African mining companies and the price of gold drops, your investments will suffer. But if you also have investments in tech companies in the US, you might still make money even if gold prices are down.
Don’t get the wrong idea; local is still lekker, but this is your opportunity to invest in anything – from US tech stocks to European luxury brands or even emerging market funds – and the whole world is your oyster.
Remember, it’s not about the number of investments you make but the quality of those investments. Proper diversification means selecting investments that are not closely related to each other.
South Africa’s rules for investing overseas – the annual offshore allowance exchange control lowdown
If you want to invest your money outside of South Africa, you’ll need to be aware of some rules set by the South African Reserve Bank. As a South African exchange control resident, here’s a quick breakdown of your options:
Small Investor
- Single Discretionary Allowance: If you’re 18 or older and have a South African ID, you can send up to R1 million offshore yearly without any extra paperwork.
Larger Investor
- Foreign Investment Allowance: If you want to send more than R1 million but less than R10 million, you’ll need a TCS PIN from SARS.
Mega Investor
- Special Permission: To send more than R10 million offshore, you’ll need specific approval from the South African Reserve Bank’s Financial Surveillance Department (FinSurv) and a TCS PIN from SARS.
Tax on offshore investments from South Africa
As a South African resident, you’re taxed on your global income, including any money you make from investments outside the country. As such, it’s crucial to ensure you’re clear in your understanding of the specific tax rules to plan your investments effectively.
- Dividends: Income from foreign dividends is generally taxed at a maximum effective rate of 20%.
- Interest: Interest earned on foreign investments is fully taxable.
- Capital Gains: Profits from selling foreign assets are subject to capital gains tax.
- Exchange Control: While South Africa has relaxed its exchange control rules, there are still limits and reporting requirements to be aware of.
Do you pay tax in two countries when investing offshore from South Africa?
You can pay tax in two countries when investing offshore from South Africa. While South Africa taxes its residents on their worldwide income, many countries also impose taxes on income generated within their borders. This can lead to a situation known as “double taxation”. However, there are ways to avoid the worst of it.
To minimise your tax liability when investing offshore from South Africa, you could consider the following strategies:
- Use Double Taxation Agreements (DTAs): South Africa has DTAs with many countries. These agreements specify how income and capital gains should be taxed in each country to avoid double taxation.
- Leverage foreign tax credits: These allow you to claim a credit for taxes paid to a foreign country against your South African tax liability.
- Choose tax-efficient investment vehicles:
– Exchange-Traded Funds (ETFs): ETFs can offer diversification and lower tax costs than individual stocks.
– Unit Trusts: Consider unit trusts that invest in tax-efficient assets like offshore property or international equities. - Consult with a tax specialist: A qualified tax advisor can provide tailored advice to help you manage your tax burden and ensure compliance with South African and foreign tax laws.
FinGlobal: your trusted partner for seamless cross-border financial solutions
Are you a South African looking to move money offshore for investment purposes? FinGlobal offers expert guidance and hassle-free solutions. Our team of experienced professionals will handle all the necessary paperwork and compliance requirements with the South African Revenue Service and Reserve Bank on your behalf, ensuring a smooth and secure process. We’re committed to providing:
- Competitive exchange rates: Maximise the value of your currency
- Low fees: Minimise costs associated with foreign currency transactions
- Personalised service: With expert advice tailored to your specific needs
To learn more about how FinGlobal can assist you, simply leave your contact details below. We’ll reach out to discuss your financial goals.