Real Estate Investor Magazine South Africa Real Estate Investor Magazine - October 2017 | Page 52

OFFSHORE TAX
Tax Benefits
What South African investors need to know
BY JAMES BOWLING
I
nvesting into a qualifying real estate development that
offers single title (whole-ownership) property means
Citizenship By Investment (CBI) investors can use their
investment as a proof of residency together with their new cit-
izenship (passport) and tax identification number to facilitate
international banking.   
Acquiring offshore assets, such as real estate, with the aim
of acquiring a second residency or citizenship, is therefore an
option for those seeking a way around the 183-day tax exemp-
tion rule overturn. However, South African residents need to
ensure that they are well informed before making a decision.
Do your homework
Strong due diligence and thorough investigation needs to be
undertaken to ensure that the new country of residency or cit-
izenship has a more favourable tax structure than the one at
home.
Acquiring a second residency or citizenship doesn’t auto-
matically qualify you for the new country’s tax benefits. You
have to move your tax residence to the new country in order
to do so. Furthermore, not all residents or citizens who qualify
for their status through a legislated residency or citizenship
THE PERKS OF TAX
Taxes grant access to superior healthcare at state
medical facilities, free or heavily subsidised edu-
cation, efficient public transport, well-maintained
parks, streets and roads as well as legal safeguards
for businesses and employees.
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OCTOBER 2017 SA Real Estate Investor Magazine
by investment programme may qualify for the tax benefits of
their new country.
South African investors particularly benefit from tax fa-
vourable jurisdictions such as Mauritius and the Caribbe-
an island countries of Antigua and Barbuda, Dominica and
Grenada. These islands offer lower income tax rates, no tax on
worldwide income, and no estate duties nor inheritance tax.
A variety of options
Through Grenada’s E2 treaty with the Unites States (US),
Grenadian citizens who invest in a qualifying US-based busi-
ness are furthermore allowed to live, work and study in the
US without ever having to submit their worldwide assets and
income to the stringent International Revenue Services (IRS).
In the European Union, Malta offers the best improvement
on personal and corporate tax exposure for South Africans as
expats, or non-Maltese citizens, are exempt from worldwide
income tax and only pay tax on the income derived in Malta.
South Africans wishing to become tax residents in Malta
can also structure their affairs in such a way to effectively only
pay a corporate tax rate of approximately 3% on worldwide
earnings.
Cyprus is also worth investigating, as there is no tax on
profits from sale of shares, dividend income and no capital
gains tax is charged upon disposals of non-Cyprus real estate.
They also offer liberal expense deductibility, group relief pro-
visions, as well as no Controlled Foreign Company (CFC) or
inheritance tax.
Paying a higher tax rate isn’t always necessarily a disadvan-
tage. There are many aspects that investors need to weigh-up
before an informed decision can be made.
James Bowling is the CEO of Monarch&Co