With South Africans being able to invest up to 45% of their retirement savings, and up to R11-million in total per calendar year offshore, many are taking the opportunity to move their investments into foreign jurisdictions – a sound move that helps to mitigate local risks and accrue the benefits of a diversified portfolio.
While investing offshore may have its benefits, investors need to bear in mind that foreign tax regulations are multifaceted and require careful consideration. Navigating offshore tax can be complex and requires a thorough understanding of South African laws as well as the regulations of the investment jurisdictions.
To start with, in terms of our Income Tax Act, South African residents are taxed locally on all income earned abroad. This income includes dividends, interest, rental income and capital gains, and must be declared to South African Revenue Service (SARS) in annual tax returns.
With income earned offshore already incurring local taxes, South Africans with foreign financial interests should be aware that the tax laws and treaties in international investment destinations can have double taxation implications. It is critical to take existing legislation into account, remain abreast of amendments and act early to avoid penalties.
Navigating offshore tax can be complex and requires a thorough understanding of South African laws.
As an example, recent updates to the UK’s non-domicile tax regime did away with long-standing preferential tax structures as from 6 April 2025. More than 80% of the UK non-domiciles polled by Oxford Economics early in 2025 said that the changes are a significant motivation for leaving the UK for other jurisdictions that still offer preferential tax dispensations. The estimated 200 000 South Africans living in the UK, and those considering moving there in the next four years, should seek professional advice on protecting their UK-based wealth from these changes to inheritance, trust and income taxes, among others.
South Africa’s Controlled Foreign Company (CFC) rules, which aim to prevent tax avoidance through foreign entities, are another significant factor to consider. Essentially, if a South African resident holds more than 50% of the shares or voting rights in a foreign company, then that company is considered a CFC. If any portion of the income earned by the CFC flows to this share-holder, it is subject to taxation in South Africa, regardless of whether it is repatriated.
Yet more legislation to bear in mind incudes the Foreign Account Tax Compliance Act and Common Reporting Standard. These international agreements facilitate the exchange of tax-related information between countries and are aimed at increasing transparency and combating tax evasion. South African residents with substantial offshore assets may find themselves subjected to increased scrutiny as tax authorities collaborate on these initiatives.
Investors need to bear in mind that foreign tax regulations are multifaceted and require careful consideration.
The good news is that local taxpayers may benefit from foreign tax credits designed to mitigate the effects of double taxation. If South African residents pay tax to foreign governments on their offshore earnings, they may claim credits for those taxes against their South African tax liability, provided that the correct procedures have been followed.
An understanding of, and compliance with, domestic and offshore tax laws, CFC rules, foreign tax credits and international reporting standards, combined with proper planning, can help South Africans to manage their offshore investments more profitably. Partnering with professionals experienced in local and international tax, investment and company laws is an essential step towards securing a sound financial future.
