Global Matters: investing offshore

MWI administers the International Endowment Option (IEO) and an International Investment Option (IIO). Please refer to the summary document published by MWI for more detail on the products.

Natural persons, offshore companies and trusts can invest in these products. However, SA companies, Close Corporations (CCs) and trusts do not qualify for a foreign capital allowance and can therefore not invest in these products.

In most instances, an investor’s tax residency will dictate the tax legislation as mostly, the tax legislation where the person resides applies, subject to double taxation agreements. Various countries have double taxation agreements in place to determine where income or capital gains are taxable if the income or gain could be subject to tax in both jurisdictions. SA has a residency- based tax system. This means that, if a person is a SA tax resident, all worldwide income is subject to tax in SA, provided the double taxation agreement does not dictate otherwise.

When investing in an endowment policy governed by the Long Term Insurance Act, the normal rules pertaining to the restriction period and access to funds apply. However, the product is specifically structured with 100 underlying endowment policies to allow for multiple withdrawals.

If the joint and survivorship option is not selected, the investment will fall into the investor’s estate and dealt with in terms of the estate administration process. Depending on the value of the investment, it may be necessary to comply with Guernsey’s domestic system of probate on death. This is an administrative and legal process in terms of Guernsey law that must be followed before the assets of a deceased person may be distributed to heirs.

The additional contract owners are automatically additional lives insured. Upon the death of any one contract owner, the policy will continue and the ownership of the deceased party will form part of his/her estate, which can be subject to Guernsey probate.

Guernsey probate requires Letters of Administration to be obtained in relation to the investor’s estate to enable the Guernsey estate to be properly wound up. To obtain Letters of Administration, the registrar of the Ecclesiastical Court in Guernsey will require the investor’s will to be proved (or authenticated) in Guernsey and submitted together with a death certificate and an inventory stating the values of the estate. This may entail the added cost of appointing a Guernsey advocate to attend to the application.

In Guernsey, the principle of freedom of testation applies to the law of succession. This means that individuals are free to dispose of their estates as they please on death. SA residents may choose to deal with their Guernsey assets in their SA wills or they may execute separate wills for their assets situated locally and in Guernsey.