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Standard Bank records 3-digit jump in offshore accounts opened

Standard Bank has seen a 121% spike in the number of offshore accounts opened since June 2023, it said in a statement.

“With domestic events like local elections, the energy crisis, and general economic uncertainty, we have noted an increase in enquiries over the past three years,” says Bridgette Kruger, head of private banking clients at Standard Bank. “However, we generally find that clients wish to diversify across borders to protect themselves from unforeseen events and uncertainty by placing some of their wealth offshore.”

Diversification is an important factor for clients to have funds offshore. Kruger adds that clients also want exposure to international markets and a hedge against fluctuations in local currency.

The increase in offshore limits under Regulation 28 of the Pension Funds Act in 2022 has also given South Africans more room to diversify offshore – retirement funds may now invest 45% of their members’ money outside of South Africa (up from 30% previously).

“It is possible that this increased offshore exposure makes people see a need to open offshore bank accounts,” says Kruger.

Other considerations for opening offshore accounts include travelling – where clients want to save in hard currency to avoid fluctuations in the exchange rate – as well as aspirations to retire overseas, children studying abroad, and geopolitical risk, which necessitates offshore exposure to protect investments.

South Africa has exchange control regulations that govern the amounts that may be externalised each year, and there are also tax considerations that need to be kept in mind.

“It is best to get tax advice on any international holdings before executing them. South Africa operates on a residency-based tax system. This means, if you are a tax resident in South Africa, you need to declare your worldwide income to the South African Revenue Service (Sars),” Kruger adds.

There are jurisdictions like the Isle of Man, which is tax neutral, where investors do not pay any additional income or capital gains tax, but any income or investment growth earned abroad needs to be declared to Sars. –