Foreign Investments and Tax Implications
Foreign Investments and Tax Implications
As a SA resident you pay tax on the income you earn and the capital gains you might make anywhere else in the world. This simply means that you have to declare and pay tax on any dividends earned from overseas shares and on interest income earned in an offshore fund.
You also have to pay taxes on any capital gains you have made on your investment when you cash this in.
Currently dividends and interest are taxed individually and differently all depending on whether it is of a local source or overseas origin.
While dividends earned from local shares are free of tax and interest earned locally is exempt from taxes for amounts up to R22 800 per annum or R33 000 a year for investors over the age of 65, both foreign interest and dividends are taxable and you are only allowed to use R3 700 of your annual interest exemption against your foreign dividends and foreign interest.
Life assurors pay tax of up to 30% on all the foreign dividends and interest income in policies. Any capital gains made in the policy is taxed at 7.5%.
The second biggest advantage of using an offshore endowment policy is that it can overcome the problems that often arise after your death when you have an offshore estate. These problems occur because many overseas jurisdictions do not recognise your SA will.
There are some distinct advantages of investing your money offshore. Do your homework carefully to find out exactly how you can benefit.
Using Local Endowments for Offshore Investments
Using Local Endowments for Offshore Investments
Making Use of Local Endowments for Offshore Investments
If you would like to invest in offshore unit trust trusts but are put off due to the tax implications, or by the hassles created by offshore assets should you die, an endowment policy offered by the foreign arm of SA life insurers might be the perfect answer to this dilemma.
Investing straight into offshore unit trust funds denominated in foreign money has at present two very distinct disadvantages over using rand-denominated foreign money. You may bring upon yourself tax that you would not pay on local investments and you can create an offshore asset that may cause trials and tribulations for your family after your death.
Life assurance or endowment policies issued by a SA life insurer with an offshore branch will enable you to invest in foreign currency offshore unit trusts without these disadvantages.
Offshore endowment policies that are unit-linked have become a popular choice when looking to invest offshore because they do not create an offshore estate and have been a way that you could avoid the taxation issues associated with investing offshore although this advantage may become less of an issue in future if proposed tax law changes are given the go-ahead.
The current tax advantage is that the local assurer is registered for tax in SA and can pay tax on your behalf if you invest in an endowment policy.
So if you are interested in investing monies overseas, best to do it by investing in unit trusts offshore.
World Tourism Growth
World Tourism Growth
There is a Positive Trend in World Tourism Growth
With the world making a recovery it is more important, now more than ever, to be in a position to send and receive monies from all the corners of the globe.
With an upward swing in the economy, and with world tourism recuperating powerfully from the recession and being decisively back on the expansion path, there should be a definite upward swing in the tourism industry going from strength to strength.
The proof of the pudding is in the eating, as the old adage goes, and the increase in international visitors saw a definite increase in international visitors towards the end of the year 2010 as well as the beginning of 2011where no fewer than 48% of all rooms that were occupied were filled by guests from Europe, the UK and the USA.
There is solid information and reports backing this up from the ITB, otherwise known as the Internationale Tourismusbörse World Travel Trends Report for the years 2010 and 2011.
According to the ITB it was revealed that Africa is expected to show an swell in expansion, development and growth rates and emerging markets were expected to contribute about two thirds of world economic growth in 2011.
Events and festivals showcased in South Africa such as the Two Oceans, the Midmar Mile, Comrades Marathon and Cape Argus Cycle Tour will always play an integral part in boosting tourism figures and will increase the occupancy in the hospitality industry during those peak periods. International cricket and other sports events also play a role in boosting the economy and tourism in SA.
Technology has made it easy to access monies from anywhere in the world, and SA is certainly no exception.
World Currency Cards
World Currency Cards
The Tedium of Finding Banks and Bureaus to Exchange Our Money Is Outdated
Let’s face facts. The tedium and stress finding somewhere to exchange our traveller’s cheques is fast becoming antiquated. Why stress about finding a bank or foreign exchange desk in an unfamiliar place where you are not familiar with either the language or the geography, when it can all be done, at ease, long before you have boarded your flight.
Pre-loaded cards, such as the world currency card will now be your new Louis Vuitton handbag, your new accessory when travelling to any destination in the world from SA.
• This handy currency card is protected by your own personalised pin and your personal signature.
• All your transactions will send you a text message which makes this card not only safe, but you will be able to keep track of exactly how much you have left in your card. In other words it is excellent for budgeting you trip every step of the way.
• The rate of exchange is fixed. If the rand suddenly drops or rises affecting the rate of exchange drastically, you will be 100% safe from any fluctuations.
• If your card is lost or it is stolen or misplaced, there is a 24 hour support for this eventuality.
• If you require a second card for your travelling companion, be it your wife, child or another person, the secondary card is free of charge.
The beauty of today’s modern technology is that times have changed, and access to money anywhere in the world is far easier to access than in the past. ATM’s are found in most major cities and ports, and using a card where VISA is displayed will enable you to either perform transactions or draw monies from a variety of international ATMS.
Tranferring Monies
Sending Money From One Destination To Another is Easy
• Sending money via money transfer is a simple and safe way to transfer money.
• Modern technology enables us to send money abroad and with the arrival of money transfers this is a far more accessible way of sending and receiving money.
• Having a money solution that is flexible is perfect if you are a frequent traveller, for business or for pleasure.
• All funds can easily be transferred online from any location anywhere in the world.
• This is a cost-effective method of sending money as charges are minimal and if you use the services of a Forex professional, they will be able to advise you regarding the sending and receiving of foreign monies.
• Transferring money through banking institutions is expensive and unwieldy.
• Be on top of your game and know where you stand regarding the rate of exchange on a daily basis through your Forex agent; this is particularly applicable if you are in importing and exporting.
• Fees are not charged through your Forex agent, plus you will experience outstanding and efficient service.
• Be in a position to be in full control of your money at all times.
Find out more about money transfers and Forex.
Transferring Money From GCC Countries
Transferring Money from GCC Countries
• Large numbers of expatriates live and work on contract in the GCC countries
• There is often a lack of banking facilities or formal institutions are often avoided for transferring monies, to and from their home.
• This therefore provides a healthy opportunity for the exchange of foreign currency.
• Although the Middle East has become a major destination for contract workers, the recent slowdown in the world economy, and especially that of the construction sector, has had a negative impact on business in the Middle East as a whole.
• There is a definite upturn in the global currency markets, and the exchange of monies.
• The rate of exchange is volatile and fluctuates daily.
• Why not save money and send your cash via money transfer.
• Make use of a professional Forex agent who can assist with your foreign exchange transactions.
• This will save you money, taking the legwork out of the exercise.
• GCC countries form the third largest destination for international migrant workers globally.
• This is only after North America and Europe.
• Finding a reliable Forex company that can help you with all your money transfers, thus securing a better rate of exchange.
Arrange a contract in advance to ensure your money transfers have a fixed rate of exchange. This method will certainly guarantee that the rates do not fluctuate whilst performing foreign exchange transactions in the future.
Foreign Money
Foreign Exchange
Once the tickets have been booked for a trip, and your passport is 100% up-to-date, and before visas can be sorted out, there is the question of organising your foreign currency.
Some of the ways that you can obtain foreign currency is through banks, companies that will handle your Forex for you, and from the Bureau de Change. Companies that handle your Forex often deliver your foreign money right to your door.
When looking for foreign exchange you can get your money in the form of traveller’s cheques or cash, as well as cash passports or you could simply make use of the credit card that you already have.
If you need travel insurance, organise this through your credit card for your foreign money.
The only way that you will be able to obtain foreign money in SA is through having a valid SA identity document, your travel documents, proof of residence and a bank account that is current.
Very few banks have a foreign exchange desk; therefore make inquiries before you set out on your expedition of obtaining foreign monies.
Traveller’s Cheques:
• Travellers cheques are a safe and convenient way of taking money with you when you travel; these can be ordered well in advance in any currency you need.
• US Dollars, Euros and also English Pounds are globally accepted all over the world, but in small out-of-the-way spots it is best to get the local currency for ease of use.
• The rate of exchange and bank fees are often costly, so best to start out with the local currency right from the outset.
• Avoid bank charges by avoiding exchanging your Rands into other denominations too often.
It might be a good idea to apply for an amount to be put into your credit card as this is a lot easier than exchanging monies whilst travelling, or trying to finding a bank or Bureau to exchange your money.
Money and Exports
Payment Options for Exporters
Revocable Documentary Credit
• A revocable credit may be amended or cancelled by the bank that issues this at any moment and without any prior notice to or approval by the exporter.
• As this puts the exporter at grave risk it is advisable not accept any payment made this way.
Irrevocable Documentary Credit
• An irrevocable credit is a definite contractual undertaking that the issuing bank undertakes to pay a certain amount, provided that the documents are properly and correctly presented and that the documents meet the terms and conditions of the credit.
• The buyer of the issuing bank cannot cancel or change the credit without the earlier endorsement or agreement of the seller.
• With irrevocable credit the documentary credits could be either confirmed or unconfirmed:
Unconfirmed Documentary Credit:
• Unconfirmed credit means that the sole and final responsibility to make payment is the responsibility of the issuing bank.
• The exporter’s bank will be notified by the buyer’s bank that an L/C has been opened on behalf of the applicant.
• The common thought amongst exporters is that immediate payment is made by the bank once the documents have been presented, but this is not the case.
• Once documents have been presented and it is clear there are no discrepancies the documents are then sent to the issuing bank by the advising bank and once they have been checked and are in compliance, only then will the funds be released.
Confirmed Documentary Credit:
• A letter of confirmation of credit constitutes a clear responsibility by a second bank – this is usually the bank of the exporter, to pay the amount on the L/C.
• This is only done once the documents are presented to the bank confirming this, and as long as there are no discrepancies.
• This is where the onus is shifted from the bank of issue to the confirming bank.
• There is a chance that the request can be declined.
Bear in mind that depending on the relationship that the exporter has with his bank, they can use the buyer’s credit to raise working capital. There are many ways to skin a cat and as many ways to pay for merchandise and goods when exporting. Investigate all options before you settle for any one method of payment.
Terms Used In Exporting
Terms Used In Exporting
There are Many Terms Used In Exporting:
• DAF is used when goods are railed or sent y truck to the border of the country.
• DES or DEQ are used specifically we goods are transported by sea.
• With DES the buyer is responsible for taking the cargo out of the ship.
• With DEQ the goods must be discharged on the quay.
These terms all sound really complicated, so what do they mean?
DAF:
• DAF means delivery occurs when the merchandise is placed at the disposal of the buyer at the border post, but before the customs border of the neighboring country.
• It is always the seller’s responsibility to clear all goods for export and to obtain any license or any other bureaucrat approval.
• It is the seller’s responsibility to arrange any and all documentation and to deal with all formalities at customs that are necessary for the export of the cargo.
• Remember that unless the specific border post has been name, the seller can select the place at the border that he feels is best.
• It is the duty of the seller to ensure that the merchandise actually arrives at the border.
• The seller carries all the risks which include damage, pilferage and loss until the good have arrived at the border post.
• It is essential for the seller to inform the buyer when the goods will arrive in order for the recipient to arrange for the collection of the goods or merchandise.
• Once the buyer has received the goods, it is his duty to deal with all the details at the border , such as customs, the formalities regarding importation of the goods, etc.
• If goods arrive earlier than anticipated, then the buyer is not obligated to take possession of these goods.
• If the merchandise arrives late, the seller may be held in breach of the contract.
DES:
• DES stands for delivery ex ship.
• Delivery occurs when the cargo arrives on board the ship at the port.
• This term can be used either for sea or for inland water alone.
If you are new at exporting it would be a good idea to lean all the terminology pertinent to this industry; but once you have the idea, the rest will fall into place.
Making Money in Exporting
Making Money in Exporting
Change Your Life By Making Money in Exporting
Make use of trade shows, trade missions and business travel abroad to ensure that your exporting business is successful.
Trade shows:
• Domestic and international trade shows are an incredibly effective way for promoting your services and your product and getting seen and heard on the international scene.
• These shows take place for most industry sectors all over the world.
• The best place to find where these trade shows are taking place is to log onto www.tsn.com or else contact the DTI, JCCI or the GEDA.
Trade Missions:
• The best place to find out about any forthcoming trade missions is to contact the DTI; they will be able to inform you about any incoming or outgoing trade missions.
• In certain instances the DTI will arrange meeting with buyers that are qualified in the pertinent countries that are to be visited.
• The JCCI will be able to arrange any appointments with buyers that are interested in your products.
• The JCCI will be able to assist with applications for financial assistance in terms of the EMIA programme.
When travelling overseas:
• Exporting and travelling go hand in glove.
• Nothing can second your personal input when you visit possible markets, as this is a very hands-on exercise.
• Best time for this kind of travel is either on the weekend or during the daytime as this will afford you time t chick in and get organized.
• This way you will also be able to get the kind of rest you need as you will feel more on top of your game.
• Travelling all night long and then going directly into a meeting is not conducive to making good and sound business decisions.
• Travel lightly.
• Courtesy and good manners make a huge difference when dealing with all sorts of people, and always never to show that you are short of time or are in a hurry as this comes across as being rude.
Take special note that the ATA Carnet is an international customs document that allows temporary imports into more than 60 different countries, and almost all merchandise can be included on a Carnet.
There is good money to be made through importing and exporting, but do your homework well before.