Demystifying the Offshore Wrapper

Investing locally or offshore can be challenging with so much more to consider than just market returns and costs.

Jaco van Zyl

Jaco van Zyl

Representative Under Supervision

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Demystifying the Offshore Wrapper

The offshore investment conversation between investors and private wealth managers has been more prevalent over the past few of years and with good reason: state capture, the state of our State Owned Enterprises (SOEs), three different finance ministers in three years, and local equity markets providing investors with very little in the form of real returns over the past four years.

Private wealth managers often suggest the use of a wrapper when advising investors on offshore investments. So, what exactly is wrapper? A wrapper is a generic term of referring to an endowment. In its simplest form an endowment is an investment product issued by a registered life company and governed by Section 54 of the Long-Term Insurance Act. The product, by virtue of the aforementioned description, has potential benefits which we will discuss further.

The potential benefits of using a wrapper for investors who already have offshore assets or are looking to physically take money offshore, either via their R1 million discretionary allowance or their R10 million foreign investment allowance, cannot be overlooked or underestimated.

Many investors are unaware that their offshore assets could potentially be subject to adverse tax and estate consequences at death:

  • Probate – probate is a process whereby a will is accepted by a court as a legal document. There are certain offshore jurisdictions which cannot be governed through a local will and, as such, a foreign will would need to be drafted to deal with the assets. In the instances where a local will is accepted, very often the local estate is delayed while the will is sent offshore – this can cause unnecessary delays to the winding up of the estate as well as add to costs as a lawyer would need to be appointed to assist in the winding up of the foreign assets in the country where the asset is held.
  • Situs – assets held in certain foreign jurisdictions, most notably the UK and the US may be subject to inheritance tax under the law of situs. In the US this results in tax up to 40% for asset bases in the US of over $60,000 and in the UK, tax at 40% for asset bases in the UK of over £325,000. Local estate duty is levied at a rate of 20% for estates under R30 million and 25% for estates in excess of R30 million.


  • Using a wrapper avoids both Probate and Situs. It should be noted that a correctly drafted will in the jurisdiction of your offshore assets could negate some difficulties associated with Probate.
  • Having a nominated beneficiary upon death means there will not be executor fees on the asset. This should not be confused with estate duty that could apply.
  • The product is tax efficient for investors with a marginal tax rate in excess of 30% as well as trusts (although a trust cannot physically take money out of South Africa via tax clearance; they are able to do so via an asset swap).
  • All tax is paid within the product, on the investors behalf, by the issuing company resulting in simple administration. Also, as tax is paid within the product all redemptions are capital in the hands of the investor.

  Income Tax Capital Gains
Individuals 18% - 45% 18%
Trusts 45% 36%
Endowments 30% 12%

Investing locally or offshore can be challenging with so much more to consider than just market returns and costs. Ensuring the correct structures are in place can save significant costs and reduce the administrative burden both whilst alive and upon death.

If you have any queries please chat to your NFB Private Wealth Manager who has the necessary skill and expertise to optimise your family's portfolio.


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