Many South Africans are tempted by the prospect of investing in property overseas. Earning a rental income in foreign currency is seriously appealing.<\/p>\n
It may also be reassuring to know you\u2019ve got somewhere else to live if it ever comes to that. But it\u2019s essential to understand that you don\u2019t immediately have residential rights in another country because you own property. (The same applies to foreigners investing in South African properties.)<\/p>\n
What\u2019s more, from a tax and estate planning point of view, buying offshore property is not nearly as easy as it looks. And it changes from country to country.<\/p>\n
Let\u2019s start with the bad stuff\u2026 Each country has its own inheritance laws. If you\u2019re not careful, your heirs could easily end up paying both South African estate duty\u00a0and<\/em>\u00a0foreign inheritance tax on your foreign property.<\/p>\n In South Africa, estate duty is payable upon death. The first R3,5 million (per person) is exempt, but after that point, your heirs will be taxed at 20% for the first R30m and 25% above that. Remember that the value of the dutiable estate includes all worldwide assets \u2013 including any overseas property.<\/p>\n Currently, South Africa has agreements to prevent double taxation of inheritance taxes with the UK, the US and some southern African nations. But if you buy property in countries that aren\u2019t on the list you may face double taxation.<\/p>\n And it gets even more complicated. In South Africa, we have freedom of testation. This means that you can leave your assets to whomever you please. But many European nations have forced heirship rules which specify that a set percentage of the estate must go to specific people (usually your spouse and\/or children).<\/p>\n Luckily, there are sometimes ways around these rules for foreign citizens. However, it\u2019s vital to make sure of this\u00a0before<\/em>\u00a0buying property in a foreign country. If you\u2019re planning on investing in offshore property, even in a country that doesn\u2019t have a forced heirship regime, it often makes sense to draft a second \u2018offshore\u2019 Will. This document should be prepared by an international taxation specialist who knows the ins and outs of inheritance law in both South Africa and foreign jurisdictions. Failing to do this can result in nasty surprises.<\/p>\n Luckily, it\u2019s much easier to avoid double taxation on income tax on rental income and CGT on the gain when selling a foreign property, as South Africa has income double tax agreements with most major nations. These typically assign tax rights to one or both countries. If there\u2019s no DTA with the country you\u2019ve invested in, you can also claim a foreign tax credit from SARS, with certain restrictions.<\/p>\n Before you splurge on that Mediterranean bolthole, be sure to do your homework. Buying foreign property can be a wonderful experience for your family and bank balance. But there\u2019s more to the dream than simply being able to afford the purchase price.<\/p>\n We strongly recommend speaking to your financial advisor before investing in foreign property.<\/strong><\/p>\n Disclaimer:<\/strong>\u00a0The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.<\/p>\n \u00a9 FinDotNews<\/p>\n","protected":false},"excerpt":{"rendered":" Many South Africans are tempted by the prospect of investing in property overseas. Earning a rental income in foreign currency is seriously appealing. It may also be reassuring to know you\u2019ve got somewhere else to live if it ever comes to that. But it\u2019s essential to understand that you don\u2019t immediately have residential rights in […]<\/p>\n","protected":false},"author":101019,"featured_media":5137,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[37,33],"tags":[],"class_list":["post-5136","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-financial-planning","category-saving-investing"],"yoast_head":"\nIncome Tax and Capital Gains Tax<\/h6>\n
The bottom line<\/h6>\n