Offshore Guidebook | Real Estate Investor Magazine REIM Offshore 2020 | Page 10

FINANCIAL Moving your wealth offshore South Africa’s high net-worth investors are looking to invest about 50% of their investable assets offshore. SIDIMA MFEKU required when externalizing funds via your SDA. It’s as simple as instructing your bank to send the funds abroad. Once the funds have been sent abroad, they can be used for investment or travel purposes. In addition to this, each South African resident has an annual foreign investment allowance (FIA) of R10m, which can be sent offshore. A tax clearance certificate is needed in order to externalise funds via your FIA. This is a relatively simple online application that is done on your SA Revenue Service e-profile platform. Once your tax clearance certificate is issued, on presentation your bank will remit the funds abroad. Individuals wishing to externalise more than R10m can do so without the requirement of bringing back the funds on redemption. Although, it is a more complicated application and you would need a special tax clearance which could take up to a few months to be issued. In addition to this, there would be a few restrictions on the funds… and annual reports would need to be compiled and submitted to the Reserve Bank. Investors using the rand for the purchase of a property abroad may take a knock in the conversion of the currency for the purchase, but can earn income from other ventures and later sell the property in the foreign currency and thus make up any perceived loss suffered at the time of purchase. I t cannot be disputed that the real estate and property market of Africa’s largest economy, South Africa, continues to grow. The growth in the property sector is certified by the growing em- ployment opportunities brought to SA by the sec- tor. However, with the political and economic insta- bility, which tends to threaten business growth and economic development, more investors are taking their wealth offshore. Investing in foreign jurisdictions (such as the USA and some parts of Europe) is ideal as their economies do not seem to be developing as slowly in relation to South Africa. It’s also wise as these jurisdictions’ currencies tend to be stronger than the South African Rand. Investing in fixed property in such jurisdictions makes the safety of your wealth steadfast. This form of investment gives offshore real estate and property investors the opportunity to rent out their property and make a profit. When comparing the recent South African economic recession and credit rating downgrades, the real estate sector has proven to be recession- resistant on a global scale and has stronger wealth innovations, more economic stability, leadership and government confidence than in South Africa. It is for 8 OFFSHORE GUIDEBOOK 2020 this (and other reasons) that entrepreneurs and real estate investors decide to take their wealth offshore. Currency conversion People have different reasons for moving to other countries. Some are emigrating for financial reasons and others are moving for better investment opportunities to escape the weakening South African Rand. It is crucial that those moving for the protection of their wealth and business development pay extra attention to the currency conversion policies in their countries of origin. The Tax Consultancy of South Africa has noted that more individuals are moving their wealth offshore, and the legal manager of financial emigration at Tax Consulting SA Jonty Leon said, “the exchange control system regulates the inward and outward flow of money in South Africa and it affects both individuals and companies.” There are two options to be considered when moving funds from South Africa. Every South African has a single discretionary allowance (SDA) of up to R1m, which can be sent offshore per calendar year (January to December). No tax clearance certificate is This allows investors to avoid further knocks from a declining rand. This sort of solution is appealing to South Africans because they will be taking funds offshore and are able to establish a base of family wealth outside South Africa, that could potentially be added to at a later stage. Moving wealth offshore: benefits Even though real estate investors might be moving their wealth offshore for wealth protection and investment purposes, they stand to get more benefits than they might have anticipated. The global real estate sector horizons are limitless, with potential unforeseen benefits that come with investing offshore. In most cases, a property purchase may give investors citizenship in their offshore investment destinations. This can be beneficial for ease of mind, mobility and security especially to someone who travels extensively or has business interests offshore or who have children who may wish to be educated and work outside South Africa. Grenada citizenship by investment The Grenada Economic Citizenship Program, established in 2013, is one of the fastest and most efficient citizenship by investment programs in the world. Qualified individuals and families can obtain a powerful second passport in Grenada in only 2-3 months by making an approved property investment of about R5 million or a financial contribution to a Government fund of approximately R2,1 million. In addition to making a qualifying property investment of about R5 million or more, candidates for Grenada citizenship by investment in real estate must pay a Government fee. Groups of two or more related applicants can also invest in Grenada real estate together – as long as each person pays slightly more than R3 million (plus Government fees). In order to maintain citizenship in Grenada, investors must retain ownership of the property for at least three years. USA medical real estate In some cases, other jurisdictions might show a different market sense of industries within the same property and real estate sector. Residential property might be at its peak in the South African real estate sector and the Commercial property industry might be showing the same in a different jurisdiction. That said, the variation of investment industries differs according to offshore jurisdiction. Assisting investors from South Africa and beyond, global real estate investment company with South African roots offers tangible property investment opportunities in United States’ heal care real estate to potential and growth driven entrepreneurs. “You get to invest like the big investors in the world and generate and earn the same returns as the big investors would,” said CEO of OrbVerst, Martin Freeman. As a business-friendly economy, the United States is one of the most favourable markets in the world to invest in. In 2018, the US gross domestic product, or GDP, increased by 2.9%, whereas South Africa’s GDP experienced growth rates of 0.8% for the same period. Growth is most certified in the US than SA. The U.S market for medical office buildings is thriving. The drivers of this beneficial activity are the increasing need for healthcare services as the U.S population ages. As healthcare providers look to better serve their patients and stay ahead of these rapid changes that are disrupting the traditional models of ‘sick care’, they are creating increased demand for a new type of real estate – medical campuses or medical malls that are closer to where patients live and work. The high-value tenants occupying these buildings and the need for long term leases make medical real estate a low-risk and profitable investment with long term reliable cash flows. SOURCES Fin24, Investec, Economic citizenship, Daily Maverick OFFSHORE GUIDEBOOK 2020 9