Great! You listened to the smart people and took your funds offshore. But how do you ensure that you do not get a big tax bill because, as a South African citizen, you are still liable to pay taxes on your worldwide income?
It’s crucial to emphasise that tax laws and regulations vary significantly between jurisdictions, and what may be permissible or advisable in one country could be illegal or ill-advised elsewhere. Therefore, thorough research and professional guidance are essential when navigating offshore tax planning and asset protection strategies.
When selecting an appropriate offshore investment product, estate planning is a crucial factor to consider.
The offshore assets in an investor’s estate could be liable to a mix of the following taxes and charges upon their passing:
- Local and foreign estate tax;
- Local capital gains tax;
- Local and foreign executor’s fees; and
- Foreign stamp duty.
The type of investment vehicle and its jurisdiction will determine which of these taxes and fees are applicable. Flexibility and creditor protection are other elements to consider in addition to these possible liabilities.
Foreign estate tax, also known as situs tax:
A government may impose a situs tax, or other taxes, on financial assets according to their location. When an owner passes away, most assets, including equities, real estate, and bank accounts, are covered by this tax.
An example of this is the UK inheritance tax. When a person who is UK-domiciled dies, inheritance tax is payable at 40% of the value of assets in their estate – however, the first £325,000 is exempt. For the US, it is also up to 40%, but the first $60,000 is exempt.
You can protect yourself against these taxes by placing your money in endowment funds or UCITS (Undertakings for Collective Investment in Transferable Securities) investment funds to minimise their tax liability. Distributing the funds among other nations lowers the total tax. For instance, policyholders of offshore endowments pay an effective capital gains tax rate of 12%, but individuals in South Africa pay 18%.
Grant of probate
A lot of platforms that South Africans use to invest offshore do so on the islands of Guernsey or Jersey. These islands require a grant of probate. A grant of probate is the equivalent of a letter of executorship in South Africa. The process of demonstrating a will’s validity is referred to as “probate,” which basically means “proof.” A grant of probate is the formal acknowledgement by the court that a will is enforceable and that the person or people named as executors under the will have the authority to manage the estate. If you have assets offshore, you might need an offshore will.
One way to protect your funds not only from situs tax and grant of probate but also ensure that your family does not wait years before the South African Master’s office finalises your estate is to invest in an offshore endowment.
Some important features of an offshore endowment
The portfolio can hold multiple currencies and include shares, exchange-traded funds, unit trusts, or a combination of these assets.
The investment provides advantageous income tax benefits, with a fixed rate of 30% for fixed income and an effective capital gains tax (CGT) rate of 12%. As most offshore funds are invested in equities, most people struggle with CGT.
Taxes are administered and incurred within the endowment structure, so investors do not need to report any personal tax to Sars.
Your personal income tax exemptions are not used for taxes within this investment.
No executor fees are charged if beneficiaries have been nominated, and estate duty applies only if the investor is not survived by a spouse.
A grant of probate is not required.
When contract owners die, CGT is exempt if the contract is transferred to the nominated beneficiaries and the base cost is transferred to them.
And then, most importantly, the investment provides protection against situs tax.
During the five-year “restricted period,” investors can withdraw up to 105% of the original capital invested through multiple withdrawals if needed.
Protecting offshore funds against taxation requires careful consideration and adherence to legal and regulatory frameworks. Speak to us to assist you with all your offshore investment needs.
Megan joined the Brenthurst Wealth team in March 2026 as an Administrative and Fiduciary Services Assistant at our Val de Vie Office in the Western Cape. Prior to joining Brenthurst, Megan gained three years of experience in the retail sector, where she developed management and client service skills.
I obtained my National Diploma in Financial Information Systems from the Cape Peninsula University of Technology in 1999 and have worked in the wealth management industry since January 2000. Over the years, I have gained extensive experience in various roles, including Portfolio Manager Assistant, Planner Assistant, and Paraplanner.
Esmarelda Isaacs-Andreas joined the Brenthurst Wealth Stellenbosch office in October 2025, taking on the dual role of Receptionist and Fiduciary Administrator.
I obtained my National Diploma in Financial Information Systems from the Cape Peninsula University of Technology in 1999 and have worked in the wealth management industry since January 2000. Over the years, I have gained extensive experience in various roles, including Portfolio Manager Assistant, Planner Assistant, and Paraplanner.
Ashley joined Brenthurst Wealth in January 2025 as Office Administrative Assistant and Receptionist for the Stellenbosch Office.
René Heystek joined Brenthurst Wealth in November 2023, as receptionist and administrative assistant in the newly established George/Garden Route office.
Michelle Heystek has built a career in the financial services over the last two decades, after obtaining her B.Com degree in Financial Management in 2005. Once she joined Brenthurst in 2006, she continued her academic journey, obtaining her Certificate in Wealth Management from INSETA in 2007, followed by a Postgraduate Diploma in Financial Planning from the University of the Free State. In 2008, she earned the Certified Financial Planner (CFP®) designation.
Anelle joined Brenthurst Wealth as a Receptionist and Administrative Assistant to Brian Butchart in the Cape Town office in December 2023. She has a wealth of knowledge from working as a liaison between Financial Advisers and clients at TMA and Absa Investment Management Services (Aims) since 1998. She obtained her B. com degree from the University of Port Elizabeth in 1997.
ADMITTED ATTORNEY | FINANCIAL PLANNER & HEAD OF BRENTHURST FOURWAYS
Sanet was appointed in April 2020, joining our Cape Town team as an Executive Administration Assistant to Renee Eagar. She has been in the financial services industry since 1990. Her previous experience includes positions at Sanlam, BJM and ABSA. She spent her last 12 years working at Alexander Forbes Private Client Wealth as a Senior Wealth Management Assistant. She has received numerous accolades over the years which include but not limited to, Alexander Forbes Client Service Excellence – Silver award in 2014,2015 and 2017. Sanet has also obtained her Certificate in Wealth Management (NQF 5) in 2012 and achieved “Best Student of the Year” from Moonstone.
Maria Smit is a Certified Financial Planner® with over 10 years of experience in the financial planning industry.
