To avoid incurring unnecessary taxes arising on death, South Africans investing offshore should always consult their Wealth Advisors and Tax Professionals and ensure that they understand international tax law, before making decisions.

Investing through an offshore trust or an offshore company may in certain instances mitigate situs exposure. However, this would require specialised structuring.

Investments through certain offshore unit trust portfolios, Exchange Traded Funds (ETFs) and insurance wrappers registered outside the relevant jurisdiction, may not attract situs tax in certain instances, even if they hold underlying situs assets.

If you are already invested in assets which could attract situs tax, you could consider selling these investments and investing into platforms which are not considered situs assets. However, the capital gains and income tax consequences would need to be considered before doing so. If you do hold situs assets, and the value of the situs assets do not exceed the nil rate bands, there would be no situs tax.

The world continues to grow into a global network, as do the global tax laws applicable to your worldwide assets. It has become much smaller and more integrated. Failing to carefully consider the tax implications of where you invest could create unnecessary costs and expenses for you and your heirs.



Except for offshore funds (unit trusts or individual stocks) there are also other offshore products that you can invest in, like a life wrapper or Offshore Investment Platforms. Each product differs with regards to liquidity, income tax, fees and currencies. We compare two products e.g. an Offshore Investment Platform with underlying unit trust versus a Life Wrapper. Please note that it is not a fully inclusive list of the differences.



The third option was to acquire the asset or investment through an offshore structure. In this instance, the principle was typically that the South African lent the funds to the offshore trust or structure and that the loan account would be an asset in his estate.


An international trust can help protect your international investment from estate duty liabilities

In light of this increasing liability, it is important to consider ‘pegging’ the value of the assets in rands for South African estate duty purposes. This can be achieved by setting up an international trust. In addition to ‘pegging’ the value of the assets in rands, international trusts offer several other advantages:

  • Continuity: The death of the settlor has no effect on the ongoing management of the trust or the trust assets.
  • Orderly distribution after death: Probate formalities (included the related cost) as well as the attendant freezing of assets while the estate is being administered are avoided.
  • Flexibility: The trust can be structured at the outset to allow for changes in regulations and best practice.
  • Protection for dependants: This includes financial protection for minors or those with disabilities as well as planning for the education of children or grandchildren of the settlor.
  • Protecting assets from seizure: The legal ownership is that of the trust and not the individuals, which makes seizure more difficult.
  • To mirror South African planning: Due to exchange control regulations, South African trusts may not own direct international assets. This means an international trust is required for exactly the same reason why a South African trust is established.


It is advisable for an international trust to be managed offshore for tax purposes. If the ‘place of effective management’ of the international trust is not in South Africa, then the international trust will not be a taxpayer in its own right. It is therefore advisable to ensure that all trust-related decisions are taken and implemented by the trustees outside of South Africa.


Understanding how donations and loans are taxed is important

An international trust can be settled by way of a donation or a loan. With relatively few exceptions, a donation is taxed at 20%. The first R100 000 of the donation is free of donations tax. It is important to remember that the interest forgone on interest-free loans is treated as a donation and is subject to donations tax. In so far as South African trusts are concerned, this is the result of the recent introduction of section 7C of the Income Tax Act. Loans to international trusts that fall into the definition of ‘affected transaction’ are however subject to section 31 of the Income Tax Act.

South African residents are taxed in their own hands when involved with an international trust. According to current South African tax legislation, South African resident individuals are taxed in their own hands whenever they are involved with an international trust, whether it is as a funder and/or beneficiary.

Contact a Centric Wealth Advisor for more information.