Investment series: Offshore investments
Luckily, you have options and you can hedge your bets. Regardless of where in the world your home country is, or where you hold residentship, you can still split up your investment portfolio and invest in more than one country simultaneously.
This is where offshore investments come in
When we say offshore investing, we are talking about the act of taking strategic advantage of benefits offered by another country or countries, by investing in their organisations, assets or currency. Before you are able to invest in another country’s assets, you need to convert your Rands into that country’s currency. To do this, the South African legislation dictates that you need a tax clearance certificate from the Reserve Bank (unless you are investing less than R1 million per year, in which case you are exempt from this requirement).
Is offshore investing for you?
These types of questions are always tricky to answer as investments always carry some degree of risk. That said, understanding the following advantages and disadvantages might help you decide.
Offshore investments are great because:
- Tax reduction: many countries offer tax incentives to foreign investors
- Asset protection: when you have assets overseas, they are often protected which means that organisations within your home country cannot cease them
- Confidentiality: tying in with the advantage of asset protection, some countries offer foreign investors complete confidentiality regarding their investment portfolios and income gained therefrom
- Diversification: like we mentioned right at the start, it is always wise to hedge your bets, making sure that even if the local investments you have don’t perform well, you still have a chance at your offshore investments making money.
Before you transfer money into an offshore investment, take these cons into account:
- Cost: there are costs involved in setting up offshore accounts
- Changing tax laws: tax laws are constantly being changed internationally and if tax reduction is part of the driving force behind why you are making offshore investments, then it’s best to do research regarding these.
In recent years, some South African investors who took the risk and invested offshore have seen amazing returns of up to 35% and with the Rand forecasted to depreciate more, it is certainly worthwhile to consider all your options.