Ralph Wichtmann | Managing Director | Sovereign South Africa | mail me |
For many high-net-worth South Africans living and working abroad, the call of home is growing stronger.
Whether prompted by family ties, lifestyle choices or a renewed focus on local business opportunities, the decision to return is often as emotional as it is practical. However, for these High-Net-Worth Individuals (HNWIs), coming back to South Africa carries significant financial consequences. This is particularly true when it comes to the preservation of their offshore wealth.
Key tax risk mitigation tool
To begin with, South Africa’s residency-based tax regime means that once you are re-classified as a resident, the South African Revenue Service (SARS) can tax you on your worldwide income and capital gains.
Without careful planning, this shift can erode wealth significantly. However, a key tax risk mitigation tool can be highlighted. Offshore trusts, when set up and administered correctly, can streamline tax efficiencies and also secure succession and estate planning. For families intent on protecting offshore wealth, these trusts provide a vital foundation.
In fact, when properly structured and funded before residency is re-acquired, trusts remain one of the most strategic tools available to high-net-worth families. They create a framework that ensures global assets stay protected and secure wealth across generations. Protecting offshore wealth through the use of trusts can therefore be one of the most decisive steps for families considering their return.
Establishing and funding an offshore discretionary
Offshore trusts must be established before setting foot back in South Africa. If you wait until you have already regained tax residency, many of the strategies that shield assets in offshore jurisdictions will no longer be available.
By establishing and funding an offshore discretionary trust while still non-resident, HNWIs can remove assets from their personal estates. This achieves two critical goals.
Firstly, it protects against South African estate duty. Secondly, it shields future capital gains from being taxed locally. Equally important, a trust separates wealth from personal ownership, which provides protection against creditor claims and simplifies succession planning. In this way, protecting offshore wealth becomes part of a structured, long-term financial strategy.
It is also important to recognise that the advantages of a trust hold only if its independence is beyond question. After reacquiring residency, SARS will scrutinise an HNWI’s offshore structures to ensure they are legitimate, compliant, and independently administered.
If a returnee is seen to be exercising control (by serving as a trustee or holding veto powers, for example), SARS can disregard a trust altogether. And, while a trust can shield assets, distributions to beneficiaries who become resident in South Africa may still be taxable locally. This underscores the need for ongoing professional oversight.
SA’s exchange control rules
South Africa’s exchange control rules have become more flexible in recent years, but compliance remains essential.
While offshore trusts can hold assets in stable jurisdictions outside the reach of local estate duty, which can be up to 25% of the inheritance, they also give families tools to formalise their long-term vision. They provide a framework for lasting family governance.
By keeping wealth ring-fenced from the risks of individual ownership, offshore trusts allow for continuity. This ensures a smoother transfer of assets to the next generation. The benefit extends beyond simple succession. Families can design broader structures, such as family councils, philanthropic arms or investment committees within the trust deed. In this way, wealth remains preserved and aligned with the family’s values and legacy wishes.
Too often, wealthy South Africans who have been living in foreign jurisdictions return home before addressing their offshore structures. By then, the most effective opportunities are lost. With the right advice, offshore trusts can protect wealth, streamline succession and provide the certainty families need to return with confidence. The key is to start planning early.
