Blue Chip Issue 78 - Jan 2021
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In many cases,<br />
indirect investment<br />
vehicles available to<br />
investors can offer<br />
the same diverse<br />
exposure to offshore<br />
markets with<br />
many of the same<br />
benefits.<br />
other words, if you have a US<br />
dollar return of 10% in a global<br />
equity fund, in a private asset<br />
swop facility you will be taxed on<br />
this 10% alone. Were you to be<br />
invested in a rand-denominated<br />
fund and it devalued by 10%, you<br />
would be taxed on the 10% US<br />
dollar returns and lose on the<br />
devaluation of the rand.<br />
Another instance in which<br />
individuals would choose to<br />
invest through an asset swop<br />
facility is to avoid withdrawing<br />
money from a trust where they<br />
would be liable for estate duty.<br />
With a private asset swop,<br />
investors can invest over and<br />
above the foreign investment<br />
allowance of R10 million per<br />
person per annum, and the<br />
R1 million discretionary allowance.<br />
When an investor has exceeded<br />
their R11 million threshold, they<br />
can take out an asset swop to get<br />
extra offshore exposure. At the<br />
end of the year, they can disinvest<br />
from the asset swop and use their<br />
R10 million allowance again the<br />
following year.<br />
WHY GO DIRECT OFFSHORE?<br />
If you have the necessary means<br />
and are in a position to do so,<br />
direct investing is the right option<br />
if you want to hedge against<br />
political instability or make future<br />
provision for your children to<br />
”<br />
study abroad. In these cases<br />
investing directly and having<br />
money available in the relevant<br />
jurisdiction is an advantage. If<br />
you believe the rand is going to<br />
decline in the future, why include<br />
the rand devaluation in the<br />
equation when you don’t<br />
need to?<br />
However, direct investment, while<br />
generally being the preferable<br />
means of investing offshore, is<br />
not for everyone. In many cases,<br />
indirect investment vehicles<br />
available to investors can offer the<br />
same diverse exposure to offshore<br />
markets with many of the same<br />
benefits.