One of the most important aspects to tax structuring is the setting up and administration of trusts. Offshore trusts are especially advantageous with regards to your business and personal tax structuring. This is especially true for high net worth individuals who would face exceptionally high tax rates if they kept their wealth on home soil.
South Africans are permitted to take a limited but substantial amount of money out of the country each year, for investment and property acquisition – provided that they are on the right side of SARS at home and up to date with their tax payments. This allows you to accumulate considerable offshore assets over time.
Financial benefits include the opportunities this affords for you to benefit from offshore tax incentives and tax solutions such as offshore trusts that protect assets. They are also a vital ‘hedge’ against domestic economic woes and risks.
Advantages of Offshore Trusts for Estate tax benefits:
Your offshore assets will be part of your Estate, and if the distribution of your Estate is drafted in a Will, they will be subject to the same laws and processes as your domestic assets. This could result in a high-taxes on those assets, not to mention lengthy and involved administration. Those assets would also have no protection against creditors.
It is far better to have your offshore assets held in an offshore trust. Trusts provide protection against creditors, and against unnecessary taxation, as they are not considered part of your SA regulated Estate on your death. The assets held in your offshore trust are exempt from the administration processes associated with the execution of Wills, the associated capital gains taxation and estate duties and executor fees. Although these benefits apply to Trusts in SA, they are exempt from local changes in regulation aimed at closing taxing loopholes offered by trusts.
Offshore investments held in an Offshore Trust can therefore be a safe ‘nest egg’ for your beneficiaries.
Foreign assets held in an offshore trust are in the best interests of your beneficiaries, provided your offshore trust is properly, ethically and legally managed by reputable offshore trust managers. Reputable trust management requires administrators be compliant with South African and foreign regulations (regulations that are themselves subject to change) and that they submit to foreign tax, SARS and trust review procedures.