SA businesses look offshore to ease COVID-19 pain, open new markets

The COVID-19 lockdown left a trail of devastation across entire industries – but it has also forced many South African businesses to look for new approaches and markets, with a growing number looking to establish offshore operations to create a greater range of options and opportunities.

Sovereign Trust Managing Director Richard Neal

While numerous South Africans have offshore investments, retirement structures and trusts to date, relatively few have set up formal trading entities to be able to transact overseas. That’s started to change in the past couple of years, with local entrepreneurs and business owners setting up offshore structures in jurisdictions like Mauritius, Gibraltar, the Isle of Man, Guernsey and the United Arab Emirates, says Sovereign Trust managing director Richard Neal.

“The pandemic isn’t going to go away any time soon, and it’s got a lot of people rethinking the way they do things. We’re seeing many clients looking to set up offshore operations to look for new markets, organically create wealth overseas, and then use those funds as a springboard for expansion, and even provide future immigration pathways,” Neal adds.

Apart from the ability to find new markets quickly and create diverse revenue streams, the immediate benefits of setting up an offshore company include ease of trade, with the ability to pay suppliers and receive funds in foreign currency without having to go through Reserve Bank approval every time.

South African entrepreneurs are also attracted by the longer-term benefits of registering an offshore company, says Neal:

  • Providing a gateway for international market expansion;
  • Access to a stable and business-friendly legal system;
  • Access to a more flexible regulatory regime;
  • Offering tax neutrality on international earnings in respect of personal or company income, capital gains and inheritance taxes;
  • Offering better access to global funding; and
  • Providing a vehicle to separate or protect assets, such as Intellectual Property, from operating entities.

One of the most popular destinations for local businessmen looking to establish an offshore company remains Mauritius, which is wooing a growing number of local investors through its relatively close proximity to South Africa, attractive tax regime and laid-back lifestyle. Occupation and residence permits are freely available to foreigners wishing to work, invest, live or retire in Mauritius.

Part of the attraction of Mauritius for foreign investors has always been its simple taxation system: company, personal income, capital gains and dividend incomes are all taxed at a rate of 15%, with further tax concessions available. Mauritian tax residents are taxed on Mauritius-sourced income only, and there is no capital gains tax, no property tax and no inheritance tax. In addition, there are no foreign exchange controls. 

Other popular destinations include Gibraltar, the Isle of Man, and Guernsey, which offer the benefit of being in the same time zone as South Africa, and the familiarity of having many South African financial institutions operated offices in those jurisdictions, says Neal.

“It’s important to choose the right offshore destination based on your products and services, and specific business and personal objectives. Don’t make life-changing decisions based on a friend’s recommendation, or on anecdotal evidence. Before you start the offshore company journey, take advice from the experts, who can unpack the various country and investment options available to you based on your specific needs,” says Neal.



Latest


28 Sep 2020
An agile workforce is key to navigating the pandemic

By: Donné Nieman, Commercial Manager at Workforce Staffing Applications for the UIF/Temporary Employment Services (TES) grant to alleviate employee layoffs…

An agile workforce is key to navigating the pandemic

By: Donné Nieman, Commercial Manager at Workforce Staffing Applications for the UIF/Temporary Employment Services (TES) grant to alleviate employee layoffs has closed. But this was always going to be a temporary measure. The long-term implications of the COVID-19 pandemic on our economy will continue to resonate and be a permanent…

28 Sep 2020
The real reason you should be investing offshore

By: Chris Potgieter, Managing Director of Old Mutual Wealth Private Client Securities Discounting for a moment the state of the…

The real reason you should be investing offshore

By: Chris Potgieter, Managing Director of Old Mutual Wealth Private Client Securities Discounting for a moment the state of the local economy and one’s particular socio-political view, the key motivation for any investor to invest offshore should be to have appropriately diversified wealth in pursuit of real capital growth at…

21 Sep 2020
Women are lagging in retirement savings and are debilitated by stress

In a recent study of their client base, Momentum Corporate revealed that almost half (41%) of the employees on the…

Women are lagging in retirement savings and are debilitated by stress

In a recent study of their client base, Momentum Corporate revealed that almost half (41%) of the employees on the FundsAtWork Umbrella Funds are women. With an almost 50/50 gender split across the client base, a one-size-fits-all approach to advice on employee benefits simply won’t cut it. This is according…

15 Sep 2020
Despite COVID-19, SA investors expect higher future returns

Even as COVID-19 halted the longest economic expansion on record and plunged the world into deep recession, South African investors…

Despite COVID-19, SA investors expect higher future returns

Even as COVID-19 halted the longest economic expansion on record and plunged the world into deep recession, South African investors expect to make an average annual total return of 12.67% – almost 2% higher than the global average predicted returns of 10.9%. This was revealed in the recently released Schroders’…


Top stories


10 Apr 2020
When the going gets tough, farmers are on familiar territory

South African farmers are old hands at adapting to uncertain and daunting circumstances, and our local agricultural industry has proved…

When the going gets tough, farmers are on familiar territory

South African farmers are old hands at adapting to uncertain and daunting circumstances, and our local agricultural industry has proved to be most enterprising in acclimatising to challenges as they arise.

10 Sep 2020
How too much choice is draining your brain

By: Paul Nixon, head of technical marketing and behavioural finance at Momentum Investments From the words of Francis Scott Key…

How too much choice is draining your brain

By: Paul Nixon, head of technical marketing and behavioural finance at Momentum Investments From the words of Francis Scott Key that dubbed America “The land of the free”, which stuck, to the unforgettable Mel Gibson monologue where an army of painted Scots were willing to trade their lives for the…

13 Apr 2020
Investors should keep a reasonable investment allocation outside of SA

MoneyMarketing asked Roland Gräbe, the head of Tailored Fund Portfolios at Old Mutual Wealth, about offshore investments in the COVID-19…

Investors should keep a reasonable investment allocation outside of SA

MoneyMarketing asked Roland Gräbe, the head of Tailored Fund Portfolios at Old Mutual Wealth, about offshore investments in the COVID-19 environment and what form a global market recovery will take.

13 Apr 2020
SA’s Proposed Covid-19 Disaster Management Tax Relief

The National Treasury recently issued the draft Disaster Management Tax Relief Bill (Bill) for public comment by 15 April. The…

SA’s Proposed Covid-19 Disaster Management Tax Relief

The National Treasury recently issued the draft Disaster Management Tax Relief Bill (Bill) for public comment by 15 April. The draft Bill, together with its explanatory memorandum, provides clarity with regards the tax relief measures President Cyril Ramaphosa announced on 23 March.


Visit the official COVID-19 government website to stay informed: sacoronavirus.co.za