Beyond borders: How offshore investing influences financial planning

…a financial adviser can help identify risks that may not be immediately apparent and ensure that all components of the financial plan work together effectively.

However, offshore investing should not be viewed as an objective or a standalone decision. It should form part of a broader financial plan that considers your personal circumstances, goals, risk tolerance and time horizon, together with the tax, estate planning, liquidity, residency, succession and long-term consequences that may arise across jurisdictions.

Understanding the exchange control framework

South Africa regulates the movement of money into and out of the country for several reasons, including the prevention of illicit financial flows. Cross-border transactions must be documented and reported, and capital transactions such as investments and loans have become more tightly regulated over the past few years.

There are three ways for individuals to obtain offshore exposure:

• Single discretionary allowance: Individuals may transfer up to R2 million per calendar year for travel, gifts, investments, etc. Capital transfers must be converted through an authorised dealer, but no tax clearance is required. The allowance is not available to emigrants and non-residents.

• Annual foreign capital or investment allowance: Individuals aged 18 and over may transfer up to R10 million per calendar year through an authorised dealer, provided they demonstrate tax compliance. Financial surveillance approval is required for amounts above R10 million.

• Asset swap: An institution may make unused offshore investment capacity available to a resident. This provides offshore exposure without permanently externalising the investor’s funds, as the proceeds of any sales of the investment must return to South Africa.

A regulatory amendment relevant to offshore exposure came into effect in 2026 that limits the donations tax exemption between spouses to only include donations made to a spouse who is a South African tax resident.

The growing complexity of cross-border planning

The decision to invest offshore often has consequences beyond investment performance. Tax residency, estate planning, existing offshore asset ownership structures, and additional compliance requirements may influence the suitability of a new offshore investment. These and other factors need to be considered to determine the overall suitability and efficiency of an investor’s South African financial plan, particularly where assets or family members are in different jurisdictions.

This complexity is becoming increasingly relevant as more South Africans live, work or invest internationally and hold dual citizenship, tax residency or assets in multiple countries.

What about tax?

Offshore investments do not fall outside the South African tax system merely because the underlying assets or product providers are located abroad. Their tax treatment may depend on the investor’s tax residency, the nature and source of the income or gain, the investment structure used, the jurisdiction in which the asset is situated and any tax obligations arising there. Jurisdictions also apply different tests to determine tax residency. Where an investor may be liable for the same type of tax in more than one jurisdiction, any applicable double taxation agreement between those jurisdictions must also be considered.

A double taxation agreement (DTA) is an international agreement between two countries that aims to eliminate international double taxation, or provide relief from it, where the same income may be taxed both by the country of residence and the country in which the income originates. A DTA does not itself impose tax; tax is imposed under each country’s domestic law. Instead, the DTA allocates taxing rights between the countries and determines whether income may be taxed exclusively in one country or in both, with relief granted by the country of residence. A DTA may override conflicting provisions of the Income Tax Act, but it cannot impose more tax than the Act itself. Where a person is regarded as a tax resident in both countries, the DTA may also contain ‘tie-breaker’ rules that determine a single country of residence for treaty purposes.

One size does not fit all

For some investors, a relatively straightforward offshore investment may be sufficient. For others, an offshore strategy means something completely different. The appropriate level of offshore exposure is also highly personal. An allocation that is suitable for one investor may be inappropriate for another, even where their investment objectives appear similar.

Other considerations include the reliability of offshore product providers, your ability to monitor market and political developments, the effect of your offshore assets and estate on your will and your dependants’ rights, regulatory and legislative changes in other jurisdictions, and time-zone differences involving companies that form part of your financial plan.

The value of advice

As your financial circumstances become more complex, financial advice can add significant value.

For investors with offshore assets, cross-border interests, complex family structures or significant wealth, a financial adviser can help identify risks that may not be immediately apparent and ensure that all components of the financial plan work together effectively. They can also assess the suitability of products and providers and involve appropriate jurisdictional specialists where necessary.

Importantly, financial plans need to be updated as circumstances change over time. Regular reviews help to ensure that investments remain aligned with an investor’s objectives and continue to support their broader financial strategy.