Ever wondered how to protect your hard-earned money from the ups and downs of the South African economy?
Offshore investing might be the answer.
Putting money into global markets spreads the risk and opens the door to opportunities beyond SA’s borders.
Let’s take a closer look at how it works…
Offshore investing from South Africa
Diversifying your investments is one of the most effective ways to reduce risk and boost long-term growth.
For South Africans, offshore investing extends opportunities beyond the local market and gives you access to international assets. This strategy not only shields your money from local economic challenges, but it can also help you achieve higher returns in the long run.
What is an offshore investment?
An offshore investment is an investment in assets outside of the investor’s home country. For South Africans, this could mean investing in foreign stocks, bonds, property, or funds.
Investing offshore has its perks. We’ll get to those in a sec.
Let’s look at the options.
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Types of offshore investments
There are a variety of ways to invest offshore. Each option has its own advantages and disadvantages. Which means investors can decide what works for their investment strategy.
Types of offshore investments:
- Foreign stocks and bonds
- Offshore mutual funds
- Real estate in other countries
- Exchange-Traded Funds (ETFs) on international exchanges
- Offshore unit trusts
- Foreign currency accounts
If you want to learn more about the various types of investments, check out our post: How to invest money in South Africa (for beginners)
How to invest offshore from South Africa
South Africans can invest offshore directly or indirectly through foreign currency accounts or offshore platforms. Local investment firms offer offshore funds. While investment platforms offer access to international stocks and ETFs via foreign exchange.
Here are the steps to invest offshore from South Africa:
- Learn more about investing or talk to a professional: Start by educating yourself on offshore investing or consulting a financial advisor to define your goals and risk tolerance.
- Invest via a local investment platform or investment firm: Choose either a self-service platform or an investment firm based on your preference for control or expert management.
- Monitor the performance and make adjustments: Regularly check your portfolio and adjust it based on market trends and your evolving financial goals.
Investing offshore via a local investment platform
Platforms like EasyEquities let you invest directly in offshore stocks and ETFs. You manage your own portfolio with easy-to-use tools, giving you control over your investments.
Invest via a local investment firm
Firms like Allan Gray or Coronation offer professional management of offshore investments, guiding you through fund selection, compliance, and portfolio management for a more hands-off approach.
How to buy offshore shares from South Africa
To buy offshore shares in companies like Apple or Amazon, South Africans can use trading accounts on platforms like EasyEquities or use a stock broker with access to international markets.
By now, it should be obvious that modern technology makes this whole process A LOT easier. So, now that you know how to do it…why should you?
Let’s look at the pros and cons.
Advantages and disadvantages of offshore investing
Offshore investing has its perks, and of course, its own set of risks.
Here’s a quick look at both sides.
Advantages of Offshore Investing
- Protects against the rand’s depreciation.
- Provides access to international markets with higher growth potential.
- Diversifies the portfolio, reducing overall risk.
- Enables investment in regions with stronger economic performance.
Disadvantages of Offshore Investing
- Involves higher fees and transaction costs.
- Requires consideration of exchange rate fluctuations.
- Demands ongoing attention to regulatory compliance.
- Complicates tax regulations.
We help thousands of South Africans reduce monthly debt costs, protect their assets, and stay out of court—find out what we can do for you.
⭐ Related content: Monthly investment plans
Tax and Exchange Control
Tax and exchange control rules can make a big difference, it’s worth taking a second to understand them.
Let’s start with tax.
Tax implications
Despite popular belief, investing offshore isn’t a way to escape taxes. Any income you earn from foreign investments—whether it’s interest, dividends, or capital gains—needs to be reported to the South African Revenue Service (SARS).
Different types of income come with different tax rates, so it’s a good idea to be informed.
Here’s the breakdown:
- Dividends from foreign shares are taxed at a rate of 20%.
- Capital gains (the profit when you sell an offshore asset) are taxed with a 40% inclusion rate for individuals. (This means 40% of the capital gain [ the profit from selling a foreign asset] is included in your taxable income.)
- Interest income from foreign investments gets taxed at the standard income tax rates. (As if it were extra salary earnings.)
Where there is income, typically, there are taxes. Tax-free savings being the exception, of course.
High earners or people who invest a lot may benefit from talking to a tax advisor. They know the ins and outs and could help restructure things in a more tax-efficient way.
⭐ Related content: How tax-free savings accounts work
Exchange Control Regulations
South Africa has some rules around how much money you can send offshore, and these are known as exchange control regulations, managed by the South African Reserve Bank (SARB).
Luckily—it’s not as restrictive as it sounds.
Exchange Control Regulations:
- Every South African resident can use up to R1 million per year for offshore investments, thanks to the discretionary allowance. No special approvals are needed here.
- If you’re looking to invest more, you can apply for a foreign investment allowance of up to R10 million per year. For this, you’ll need a tax clearance certificate from SARS, but it’s pretty straightforward.
- Want to go above R10 million? You’ll need to get special approval from SARB for anything over that limit.
Keep these limits in mind, and you’ll be fine.
In summary
Offshore investing is a powerful way for South Africans to diversify their portfolios and tap into the vast potential of global markets.
Take the time to explore your options, follow the steps, and check out the various platforms and firms (and their fees!).
If you want to take care of your debt before you start investing. Talk to someone on our team at My Debt Hero. We specialise in helping South Africans reduce their debt.
