Externalising funds, or choosing to invest offshore, is a perennial topic of discussion among many South Africans. Safeguarding your wealth and optimising your tax efficiency has long been a primary motivator for portfolio diversification abroad.
More recently, the political climate, the constant load shedding, and the newly introduced grey listing have given investors more reasons to look abroad. But, as with many things, offshore investing has opportunities and obstacles. Before deciding to externalise your funds, consider these key questions.
1 Will it help me meet my objectives if I invest offshore?
“Investors must clearly understand their own requirements and objectives for expanding globally before making decisions. And that must be discussed with an advisor,” maintains Sasha Mussett, Business Development Director, Safyr Utilis.
Before externalising your funds, you must define your objectives and explore all the available options for the protection of you and your family’s wealth.
This is where an experienced advisor is invaluable. Advisors can assist with developing a comprehensive strategy that includes portfolio management with long-term wealth objectives and can also help you to navigate the tax implications of offshore investments and their impact on estate planning.
Depending on the type of investment, Mauritius offers several distinct benefits, including a favourable tax regime, political and economic stability, a strategic location with a business-friendly environment, abundant skilled labour, and an excellent quality of life.
2 Will my choices help me to optimise my tax position?
Many investors look to offshore investment solutions for tax efficiency reasons. Whether that will happen depends entirely on where the funds are invested. Destinations such as Mauritius offer an attractive investment landscape with numerous tax advantages. The country has signed double taxation avoidance agreements with 46 countries, and multiple other agreements are in various stages of approval.
Mauritian‑resident companies can set off any foreign withholding taxes from foreign‑sourced income against their domestic tax liability and can claim an underlying tax credit on foreign dividends in specific circumstances.
Certain types of income benefit from partial tax exemption. An 80% partial exemption applies in the following cases if actual foreign taxes are not claimed: foreign dividends; interest in specific cases; income derived from ship, aircraft, and rail leasing or attributable to a permanent establishment or from a Collective Investment Scheme (CIS) or a Closed-End Fund (CEF), providing the licences are approved by the Financial Services Commission (FSC).
Partial exemption also applies in the leasing and provision of international fibre capacity; the sale, financing arrangement, and asset management of aircraft and its spare parts; and aviation advisory services related thereto.
3 Have I received the right advice about investing offshore?
If you’re already working with advisors in the investment space, are you confident that they have accurate and current knowledge on fund externalisation and offshore ownership relating to the externalisation of funds, particularly regarding specific jurisdictions? Can they evaluate the potential benefits and risks of offshore investing?
It’s essential to work with advisors who can facilitate a strong working relationship with a wealth management team that is based in a financial jurisdiction that they know well. Shawn Thompson, director at Safyr Capital Partners, explains the opportunities for investors in Mauritius. “Mauritius has very robust and efficient banking. Similar to South Africa, it’s easy to get things done, and it’s worth noting that there’s a competitive banking landscape. On top of that, there is a supporting ecosystem of tax advisors, lawyers, and professionals who can help structure deals.”
4 Are there investment options that will give me a better return on investment?
Investing offshore is an appropriate way to diversify your portfolio and gain exposure to different markets. How and where you invest determines the potential return on investment (ROI), and depending on your objectives, there are jurisdictions that will offer more attractive returns.
Take Mauritius for example. It is first in Africa for Ease of Doing Business (World Bank). Furthermore, it ranks 33rd on the Investment Safety Rankings and is the wealthiest nation in Africa according to the New World Wealth 2022. These statistics alone make Mauritius a very favourable investment landscape. In addition, there are very few investment restrictions—you can purchase property, invest in the stock market, establish a business, and open a bank account without ever having to set foot in the country. Foreigners can own a Mauritian company outright.
5 What over benefits will externalising my funds provide?
In addition to the financial benefits of externalising your funds, there are other benefits to consider. For one, Mauritius offers various types of residency permits via direct investing, occupation, or property development schemes.
Similarly, purchasing real estate through government-approved and managed purchase plans comes with the offer of permanent residency. You can also qualify for a combined occupation and residency permit if you meet specific criteria or invest money in Mauritius as a business-minded investor.
There’s even a retirement residency option. If you’re 50 years old or over and can transfer USD1 500 per month or USD18 000 per year, you can qualify for a 10-year residency permit, which can be extended if certain conditions are met.
All these are in addition to the opportunity to grow your business globally in a country with a very business-friendly environment.
Externalising your wealth in Mauritius is an excellent option if you’re looking for offshore investment solutions or are undecided about where to place your money. The team at Safyr Utilis can assist you with this decision.
Would you like to hear more about offshore investing in Mauritius and other wealth‑management tips?
Contact us to discuss your options.