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What you should know about investing offshore

South Africa has a residencebased tax system, which means you must pay tax in this country on your assets regardless of where in the world they are.

If you have not disclosed assets to the South African Revenue Service for tax purposes, it is likely that you are in contravention of the tax legislation.

You are entitled to invest offshore, as long as you do not contravene the exchange control and tax legislation. You are entitled to take up to R10 million offshore as a foreign investment allowance and R1 million annually for any purpose, including travel and investment.

The South African Reserve Bank monitors cross-border flows, and certain transactions must be approved by authorised dealers.

Tax havens are countries with low tax rates that make it possible for investors to hide their accounts from the authorities in the countries where they live. Fewer and fewer tax havens are agreeing to keep accounts secret, and the few that do are likely to charge a high price.

Even in these countries, there is a risk that your personal details will be leaked, particularly if the tax haven’s investment and trust industry is not very professional.

Financial institutions and certain people, such as accountants and estate agents, are obliged, in terms of the Financial Intelligence Centre Act, to report “suspicious” financial activities, including possible taxevasion and money-laundering.

More stringent requirements on institutions to know their clients and beneficial owners (the people who control a juristic entity, such as a company) have been proposed in the Financial Intelligence Centre Amendment Bill to underpin the reporting requirements of the Organisation for Economic Co-operation and Development.