Investing offshore by staying local can offer tax advantages

SA investors trying to cope with the volatility of local markets have long looked towards distant shores to seek better returns for their money, with leading offshore companies such as Apple, Facebook, Alphabet (Google) and Netflix generating extraordinary returns. 

Choosing the right investment vehicle to take advantage of this offshore exposure is one of the choices you will face if you go this route. Depending on the way you choose to invest your money, there may be tax advantages, as well as additional benefits for the rest of your family in the long run. 

While the JSE is one of the most advanced exchanges in the world, with a proven track record of good local companies, the process of diversifying your portfolio brings many rewards. It’s no secret that SA makes up only a tiny portion of the world’s capital markets.

With the relaxation of exchange controls and a discretionary allowance of up to R10m a year available to invest overseas, many money-savvy ordinary investors are investigating ways to get into these markets.

By putting your money in an offshore investment vehicle through a local money manager, you can decrease your exposure to the SA economy, while investing in shares of some of the most profitable companies in the world.

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You can also invest in offshore index trackers, which include equity, bond and cash trackers. Tracker funds reduce the costs of investing offshore due to their low management fees. One of the other advantages of staying with your local money manager is that you can further reduce your costs with lower platform fees by taking advantage of the aggregation benefit if you own other qualifying products with them.

Something not always considered by many investors is managing your estate. Some local investment products use an endowment wrapper, so no additional tax is payable when you need your money if you are the original owner.

The investment will be dealt with under SA rules, and can be transferred into an offshore or local bank account of your choice.

With your offshore investments being an endowment, the applicable taxes are generally advantageous to those in the highest tax bracket. 

The choices you make with your money when heading overseas will influence your ability to enjoy returns in many cases. Keeping your focus local by taking advantage of money managers operating locally within SA laws, offers some advantages.

Liberty is also offering investors the chance to get involved in two structured investment opportunities that take advantage of global growth opportunities.

The first is the Liberty Structured Global Performer ESG V1 portfolio, which tracks the MSCI Global Diversified ESG 100 Decrement 5% Index, for investors who feel that companies which adhere to sustainable environmental, social and governance principles make a worthy investment opportunity.

The other is the Liberty Structured Global Performer V1 portfolio, balancing 50% between the S&P 500 and the Eurostoxx 50 to take advantage of some of the best-performing companies in the US and the Eurozone.

Both portfolios are protected from currency swings as the proceeds are denominated in rand and the benefits provided on both portfolios are net of fees and taxes. The portfolios are available on Liberty's Evolve Investment Plan and Evolve Investment Plan (Sinking Fund) for a limited period, which closes on December 3 2021.

The future is exciting, but difficult to predict. This is why we are able to offer investments that manage the inevitable risk of market volatility, while taking a broad stake in the future where clients' money will grow with the best possible choices.

Speak to a Liberty financial adviser who can help you put together your offshore investments in a way the best suits your needs and personal circumstances. The global advantages are definitely there if you are willing to look at them from a local perspective.

About the author: Nosipho Nhleko is investment product specialist at Liberty.

This article does not constitute tax, legal, financial, regulatory, accounting, technical or other advice. The material has been created for information purpose only and does not contain any personal recommendations. While every care has been taken in preparing this material, no member of Liberty gives any representation, warranty or undertaking and accepts no responsibility or liability as to the accuracy, or completeness, of the information presented. Please consult your financial adviser should you need advice from a financial nature and/or intermediary services. 

For more details about benefits, definitions, guarantees, fees, tax, limitations, charges, premiums/contributions or other conditions and associated risks, speak to a Liberty financial adviser or your broker.

The Liberty Offshore Investment Plan is underwritten by Liberty GRP Ltd (Jersey Branch). Authorised FSP (2409). Terms and Conditions, risks and limitations apply.

This article was paid for by Liberty Group SA.