SOUTH AFRICA’S INSURANCE TIMES: DIVERSIFYING OFFSHORE

Taylor, Andrew

Over the last few years South African high net-worth individuals have been steadily increasing their international investment exposure. This affords them the opportunity to access substantially greater returns as well as providing a defence mechanism against local currency fluctuations caused by political and economic uncertainty,

SARS offered investors a massive opportunity in 2010 when it increased the local investment allowance for exchange control purposes. Previously there was a once-off limit of R4 million per individual, but this has been increased to R4-million per person per annum. This offers a tremendous opportunity to boost one’s offshore investments across jurisdictions, markets and financial instruments.

“It makes sense to invest offshore, provided it is done for the right reasons and forms part of a long-term financial plan,” says Andrew Taylor, Vice President of Henley & Partners.
As to just how much individuals should be investing offshore, he suggests “as a rule of thumb, clients should have 30% of their assets invested abroad to maintain a diversified portfolio. This is not a hard-and-fast rule and it will vary depending on individual circumstances.”

While investing offshore can open the door to more attractive tax regimes, it can also open an opportunity to acquire overseas citizenship. Favourable tax rates in an offshore country are obviously designed to promote a healthy investment environment and attract outside wealth. There are several locations around the world that offer such incentives. These include Malta, which has been particularly successful in securing investments from South Africans looking to emigrate or ahead of a planned retirement. Caribbean islands such as St. Kitts & Nevis and Antigua and Barbuda also offer beneficial financial opportunities, in addition to an exotic lifestyle.

Another compelling reason for selecting Malta, incidentally, is that it has one of the lowest tax rates in Europe. Only income remitted to Malta is subject to taxation, and this enables individuals and companies to own offshore investments and not pay a cent in tax. On top of that, remittance of capital gains into Malta is tax free. For such a tiny country, with very few natural resources and a small population, attracting investors can dramatically increase economic potential. Malta adopted the Euro in January 2008 and, while its economy is dependent on foreign trade, manufacturing and tourism, the island’s financial services industry has grown in recent years. As developed markets in Europe and elsewhere recover from the worldwide economic crisis, Malta appears to be ahead of the game. This is because it managed to avoid the economic woes of Europe, while the island’s debt was been largely held domestically so its banks had low exposure to the financial crisis.

For investors looking for bigger returns, Malta offers another interesting investment potential, as it is Europe’s premier jurisdiction for all forms of gambling products. There are hundreds of gaming operators, software suppliers and auxiliary service providers based in Malta.

This article was originally published on South African Insurance Times website. 

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