South Africa’s 2026 Budget, delivered by Finance Minister Enoch Godongwana on 25 February, signals a period of relative fiscal stability after several years of pressure on public finances, writes Ralph Wichtmann, Managing Director of Sovereign Trust (SA).

Government debt is expected to peak and gradually decline as fiscal consolidation gains traction, while economic growth is forecast to improve moderately over the next few years.

This shift was best illustrated last November, when South Africa secured its first credit rating upgrade in nearly 20 years after S&P Global raised the country’s foreign-currency long-term sovereign rating from ‘BB-‘ to ‘BB’. It cited stronger growth prospects, an improving fiscal outlook and reduced contingent liabilities following better performance at state power utility Eskom.

The other really positive news is that South Africa was officially removed from the Financial Action Task Force (FATF) ‘grey list’ of jurisdictions under increased monitoring last October. The removal recognised South Africa’s progress in strengthening its anti-money laundering and counter-terrorism financing (AML/CFT) frameworks to address the 22 deficiencies identified by the FATF in February 2023.

South Africa is widely regarded as being one of the most significant financial hubs on the African continent. With that comes the expectation that it should meet international standards of governance, oversight and transparency in respect of financial matters.

South African Budget

For South African tax residents with international assets or those considering externalising capital, the Budget did not introduce sweeping new tax measures. However, several updates and policy signals remain highly relevant for offshore structuring, wealth planning and estate strategies. Below are the key implications for clients:

1. No major tax increases – but continued reliance on a narrow tax base

One of the most notable developments is that the previously proposed ZAR20 billion tax increase was withdrawn due to stronger-than-expected revenue collections. At the same time, the National Treasury highlighted the structural reality that a relatively small group of high-income taxpayers contributes a significant portion of South Africa’s tax revenue.

For internationally mobile individuals and families with global wealth, this reinforces a long-standing planning consideration:

• South African tax residents remain taxed on worldwide income and gains.
• Effective international tax planning and asset structuring remains essential.

2. Tax incentives to encourage Investment and Savings

The Budget introduced several measures to encourage domestic investment and savings, including increasing the annual limit for tax-free investment accounts from ZAR36,000 to ZAR46,000 and retirement fund deduction limits were also increased to ZAR430,000 annually.

The Capital Gains Tax (CGT) annual exclusion for individuals is to increase from ZAR40,000 to ZAR50,000 and the CGT exclusion in respect of the disposal of a primary residence is also to increase from ZAR2 million to ZAR3 million. The threshold for exemption from Donations Tax applicable to individuals, will increase from R100 000 to R150 000.

While these measures primarily support domestic savings, they highlight a broader government objective; strengthening South Africa’s investment culture. For high-net-worth families, this reinforces the importance of balancing:

• Onshore tax-efficient vehicles (retirement funds and tax-free investments), and
• Offshore investment structures for diversification and currency risk management.

3. Implications for South Africans with International Income

The Budget reiterates the central importance of tax residency in determining tax obligations.

• South African tax residents are taxed on worldwide income.
• Non-residents are taxed only on South African-sourced income and assets.

For individuals living abroad or planning to emigrate, this distinction remains one of the most important planning considerations. Key areas that requiring careful planning include:

• Timing of tax residency cessation.
• Exit Tax implications of becoming non-resident.
• Structuring foreign income streams through appropriate entities.
• Ensuring compliance with exchange control and tax reporting obligations.

4. Estate Planning and Trust Structures

South African trusts continue to play a central role in wealth planning but remain subject to a relatively high tax rate of 45%. This reinforces the need for careful structuring when trusts are used in cross-border estate planning. Key considerations include:

• Whether a South African trust or offshore trust is more appropriate.
• The role of foreign beneficiary structures.
• The interaction between CGT, Donations Tax and Estate Duty
• Whether assets should be held through offshore companies that are owned by trusts.

International families should also consider the impact of:

• Controlled Foreign Company (CFC) rules.
• Anti-avoidance provisions.
• Tax reporting obligations.

5. Exchange Control and Capital Externalisation

One of the major Budget changes introduced in relation to exchange control rules is the increase in the Single Discretionary Allowance from ZAR1 million per calendar year to ZAR2 million with no tax clearance needed. It should be noted, however, that the Foreign Investment Allowance, which requires SARS Approval for International Transfer (AIT) tax clearance, remains unchanged at ZAR10 million per year. These allowances remain the primary mechanisms for legally externalising capital.

For wealthy families, capital externalisation strategies typically involve:

• Phased transfers of investment capital offshore.
• Offshore trusts or Family Investment Companies (FICs).
• Diversification of custody, banking and asset management.

6. Increased focus on Financial Transparency and Compliance

South Africa’s removal from the FATF grey list was a key milestone and the government has indicated that continued strengthening of AML/CFT frameworks remains a priority. South Africa’s next FATF mutual evaluation is scheduled to begin in the first half of 2026, with the assessment concluding in October 2027. This Fifth Round evaluation will be assessing the sustainability of South Africa’s reforms. For globally mobile families, this is likely to involve:

• Increased reporting obligations.
• Greater scrutiny of cross-border transactions.
• Continued emphasis on increased tax transparency.

The Common Reporting Standard (CRS) was first published by the OECD in 2014 as the global standard for automatic exchange of financial account information. It was designed to promote tax transparency and help tackle offshore tax evasion. Over 100 jurisdictions worldwide have implemented the CRS and most of those have now been exchanging information since 2018.

This year, global tax transparency has been fundamentally expanded by bringing crypto assets, digital money and enhanced due diligence into automatic exchange regimes under the new CRS 2.0 and the Crypto-Asset Reporting Framework. From 2026, financial institutions and crypto service providers must report broader asset classes, transaction-level data and additional client identifiers, closing long-standing reporting gaps and significantly increasing cross-border tax visibility.

This expansion makes compliant structuring more important than ever. For internationally active South African families, the focus therefore remains clear – robust global structuring combined with long-term flexibility.

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The Financial Action Task Force (FATF), the international anti-money laundering watchdog, removed South Africa from its ‘grey list’ of countries following a successful on-site review of its Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) regime in July.

The delisting reflects comprehensive reforms implemented since 2023, including expanded regulation under the Financial Intelligence Centre Act, enhanced beneficial ownership transparency, stricter reporting obligations and improved enforcement capacity.

South Africa was placed on the grey list in February 2023 after the FATF identified significant weaknesses in its anti-money laundering and counter-financing of terrorism framework. These included gaps in enforcement, transparency around beneficial ownership and asset recovery processes.

The FATF welcomed South Africa’s significant progress in strengthening the effectiveness of its AML/CFT regime to meet the commitments in its 22-point Action Plan by:

• Demonstrating a sustained increase in outbound Mutual Legal Assistance (MLA) requests that help facilitate ML/TF investigations and confiscations of different types of assets in line with its risk profile.
• Improving risk-based supervision of Designated Non-Financial Businesses & Professions (DNFBPs) and demonstrating that all AML/CFT supervisors apply effective, proportionate and effective sanctions for non-compliance.
• Ensuring that competent authorities have timely access to accurate and up-to-date Beneficial Ownership (BO) information on legal persons and arrangements and applying sanctions for breaches of violation by legal persons to BO obligations.
• Demonstrating a sustained increase in law enforcement agencies’ requests for financial intelligence from the Financial Intelligence Centre (FIC) for its ML/TF investigations.
• Demonstrating a sustained increase in investigations and prosecutions of serious and complex money laundering and the full range of TF activities in line with its risk profile.
• Enhancing its identification, seizure and confiscation of proceeds and instrumentalities of a wider range of predicate crimes, in line with its risk profile.
• Updating its TF Risk Assessment to inform the implementation of a comprehensive national counter financing of terrorism strategy.
• Ensuring the effective implementation of targeted financial sanctions and demonstrating an effective mechanism to identify individuals and entities that meet the criteria for domestic designation.

As part of a comprehensive reform programme, the South African government passed the General Laws (Anti-Money Laundering & Combating Financial Terrorism Financing) Amendment Act 2022 and the Protection of Constitutional Democracy Against Terrorism & Related Activities (POCDATARA) Amendment Act in December 2022.

These addressed 15 of 20 deficiencies relating to the adequacy of laws and legal frameworks that were identified in the mutual evaluation report. Further actions then undertaken to address deficiencies include:

• Expanding the scope of accountable institutions under the Financial Intelligence Centre (FIC) Act 38 of 2001 to bring crypto-asset service providers and high-value goods dealers into scope.
• Strengthening beneficial ownership transparency through amendments to the Companies Act 71 of 2008 and launching the Companies & Intellectual Property Commission’s Beneficial Ownership Register, which requires the disclosure of interests of 5% and above and blocks annual returns without prior BO filings.
• Improving enforcement capacity through increased funding for the Directorate for Priority Crime Investigation (DPCI) – generally known as the ‘Hawks’ – and the National Prosecuting Authority.
• Imposing stricter reporting obligations under sections 28 and 29 of the FIC Act, including cash threshold reporting and suspicious transaction reporting.
• Amending the Prevention & Combating of Corrupt Activities Act 12 of 2004, including the creation of a new offence for the failure to prevent corrupt activities by private companies and state-owned entities.

South Africa must continue to work with the FATF and Eastern & Southern Africa Anti-Money Laundering Group (ESAAMLG) to sustain the improvements in its AML/CFT system.

“South Africa’s progress in addressing the AML/CFT deficiencies and exiting the FATF grey list is a significant achievement,” said Sovereign South Africa Ralph Wichtmann. “But it is only the start of a broader process to continue to strengthen key institutions, improve enforcement and governance processes, and to ensure that these improvements are maintained.

“The FATF delisting will result in reduced compliance, increased access to global banking services and a more straightforward basis for cross-border transactions. But businesses and investors will also be required to maintain robust risk-based compliance programmes, ensure accurate beneficial ownership disclosures and perform enhanced due diligence for high-risk transactions.”

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The Isle of Man is famous for many things, but nothing defines it quite like the TT: a motorbike race so fast, so technical, and so unforgiving that even veteran riders describe it as a test of absolute precision. With more than 200 corners being navigated at speeds exceeding 320km/h, the TT has earned its reputation as the most dangerous motorcycle race in the world.

Yet just beyond the roar of the engines, the island presents an entirely different side; one defined by security, structure, and stability rather than risk. And it is this quieter, more predictable side that is catching the attention of globally minded South Africans looking to grow and preserve their wealth for generations to come.

A stable structure in a volatile world

An Isle of Man discretionary trust is built on a robust foundation. It begins with a settlor who has the intent to create a trust, a clearly identifiable trust asset and a corporate trustee that assumes legal ownership on behalf of beneficiaries. “This structure is designed to endure,” says Coreen van der Merwe, Director at Sovereign Trust (SA), a company specialising in setting up offshore companies and trusts around the world. “It offers continuity and protection even when personal circumstances change.”

Beneficiaries do not own the assets; they only have the hope of benefiting. This distinction, combined with the island’s well-established trust laws, makes the structure attractive for high-net-worth individuals seeking long-term planning solutions.

Layered on top of that is the Isle of Man’s tax environment: 0% income tax, no capital gains tax, no inheritance tax, and no withholding tax on distributions. Compared to the tax environment of the United Arab Emirates, this might not be too different, however, many South Africans plan on moving back to South Africa at some point and this is when these benefits become really valuable.

Why more South Africans are looking to ‘man up’

Key advantages of setting up a trust in the Isle of Man include the preservation of wealth for future generations without the fragmentation that often occurs after death, as well as seamless succession planning that avoids the delays and costs associated with multi-jurisdictional probate and international executor fees. Trust structures also provide robust asset protection from potential creditors, business risks, or relationship breakdowns, while ring-fencing assets such as farms, holiday homes and business interests that cannot be easily subdivided. In addition, they support minor or vulnerable beneficiaries through tailored provisions and create a clear separation between personal and business assets, offering both clarity and long-term protection. Timing is particularly important and ideally the trust should be set up before the settlor/founder of the trust has returned to South Africa and/or has become SA tax resident again. When a person gets the timing right, assets transferred to the trust will be ringfenced from South African taxes even when distributions are received from the trust in the future.

An additional, and often overlooked, benefit is the local expertise available on the island. “Many Isle of Man trust administrators, lawyers and accountants are themselves South African,” notes Van der Merwe. “This dual perspective is truly invaluable. They understand both the regulatory requirements and the cultural nuances that shape South African wealth planning.”

Setting up a trust: what South Africans living in the UAE must know

Establishing a trust offshore is not a quick, one-step exercise. It requires careful planning and professional guidance, particularly because South Africans must navigate South African Reserve Bank and Revenue Service requirements in addition to The Isle of Man’s legal framework.

The process includes:

• Consulting a cross-border specialist who understands dual tax residency, controlled foreign company rules, and exchange control.
• Choosing the most appropriate trust structure, usually a discretionary trust.
• Reviewing and signing the trust deed, which outlines trustee powers, beneficiaries and the trust’s purpose.
• Transferring an initial asset, which formally activates the trust. Without this transfer, the trust does not exist in law.
• Transfer assets to the trust before you become South African tax resident.

Once established, the trust can hold global investments, property, portfolios, and other international assets, in strong currencies like GBP, USD, and EUR.

For South Africans with global wealth ambitions, the Isle of Man offers a jurisdiction with decades of stability and a legal system built for long-term security, Van der Merwe emphasises that success in offshore structuring depends on expertise, not experimentation.

“Just as the TT demands absolute precision and risk mitigation, so does cross-border wealth planning. An offshore trust should give you peace of mind, not uncertainty and working with professionals who understand South African realities as well as offshore rules is the only way to achieve that.”

For more details, contact Coreen van der Merwe below.

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South African farmers are no strangers to resilience. Year after year, they face unpredictable weather, rising input costs and shifting global market conditions; but they push through the dirt to deliver world-class produce to markets across the globe.

South Africa’s agricultural export market continues to grow, cementing the country’s position as a major player globally. In Q1 2025, exports reached USD3.36 billion, a 10% increase from the same period in 2024.

Yet as South Africa’s export footprint expands, many farming businesses are beginning to ask an important question: how can we structure our growth to make the most of these international opportunities safely, efficiently and for the long term?

According to Brandon Voges, business development manager at Sovereign Trust (SA), the answer lies in offshore structuring – and not just as a tax strategy, but as a holistic business growth solution. Offshore investment vehicles, such as trusts, companies and family office structures, established in a jurisdiction that offers regulatory, tax and administrative benefits enable you to preserve and grow your wealth internationally while continuing to reside in South Africa.

Thinking beyond borders

When your produce crosses borders, so does your business. Offshore structuring through reputable jurisdictions such as Mauritius or Guernsey allows farmers to position their operations for global expansion while maintaining strong ties to their South African roots.

Arranged correctly, an offshore structure can help farmers in the following ways:

• Protect export income and reinvest profits offshore for future growth.
• Access international finance to expand distribution networks and enter new markets.
• Manage foreign exchange efficiently.
• Build long-term succession and wealth plans that secure the family legacy for future generations.

However, offshore success depends on more than location. It depends on understanding the unique realities of South African farming and integrating them with compliant, practical international structures.

Key considerations

Too often, offshore advice is disconnected from the everyday realities of farming — from seasonal cash flow cycles to export regulations and family business dynamics.

1. Compliance and confidence

Offshore expansion doesn’t mean stepping outside the rules – it means knowing how to work within them strategically. With increasing scrutiny from the South African Revenue Service (SARS) and global regulators, obtaining qualified tax, exchange control and transfer pricing advice is essential. Sovereign’s structures are designed to be transparent, compliant and efficient, ensuring farmers can grow with confidence while meeting every regulatory requirement on both sides of the border.

2. Securing the family legacy

For many farmers, the business is also the family’s most valuable asset. Offshore planning creates opportunities to structure this wealth for succession, investment and protection. Through collaboration with wealth management specialists, families can ensure their offshore assets and investments are managed in a way that aligns with their broader estate and succession planning goals, giving peace of mind that what they have built will endure.

3. The financial ecosystem that supports growth

Offshore success requires the right financial infrastructure. Farmers expanding abroad should consider working with forex and financing partners who understand the agricultural industry’s unique timing, risks and capital requirements. From foreign exchange management to cross-border financing, having a partner that understands the rhythm of farming can make the difference between opportunity and obstacle.

Bringing it all together

At Sovereign Trust we believe that offshore success is not built on one element alone. It’s about the synergy between structuring, tax and transfer pricing compliance, wealth management and financial strategy.

Through our global office network, our professional teams can draft trust deeds, incorporate companies, and create director or shareholder agreements that meet both South African and offshore requirements. We can also then provide the ongoing support in administering, managing and reporting to ensure your structure remains in good standing with local and international regulators.

By working with a South African-led team that understands the agricultural mindset and combines it with world-class offshore expertise, farmers can build structures that don’t just save costs, they create opportunity.

This is about planting the seeds for a future where South African farming businesses can grow beyond borders, with confidence, clarity and control.

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Global strategies, lasting legacies.

YOU ARE FORMALLY INVITED TO ATTEND THE SOVEREIGN TRUST

2025 RETIREMENT AND WEALTH STRUCTURING SEMINAR

In today’s evolving financial landscape, lasting legacies require more than traditional planning – they demand global insight and forward thinking strategies.

Join us for an exclusive seminar as we explore the latest in wealth and retirement structuring, global trends, and key regulatory updates alongside our expert sponsors.

Click here to read and download the Midrand agenda

Click here to read and download the Cape Town agenda

DATE
Tuesday 23 September 2025 (Midrand)
Thursday 25 September 2025 (Cape Town)

TIME
Registration at 08h00 Conference running from 09h00 to 16h15 Sponsor Exhibition from 16h15 to 17h00

VENUE
Tuesday – Courtyard Hotel, Waterfall City Midrand
Thursday – Southern Sun Newlands Cape Town

Please Note: The Cape Town event is now at full capacity but there are still a few places left on the Midrand event.

If you would like to RSVP for Midrand, please contact Mandi Diener.

The post 2025 Sovereign Trust SA Wealth and Retirement Structuring Seminar appeared first on The Sovereign Group.

South Africans can start with one basic certainty: nothing in the South African Income Tax or Reserve Bank regulations prohibits South African nationals from opening a bank account, investment account or setting up a trust overseas.

Opening an offshore account or setting up an offshore trust is a prudent financial strategy because it provides currency protection against rand depreciation, helps to diversify your investments and allows access to a far greater range of investment opportunities.

Personal circumstances will dictate the timing, but opening an offshore bank account will typically be a practical and helpful move long before you’ve build up significant wealth to justify setting up an offshore trust. Once the decision has been made to go offshore, the next question is how to do it as quickly and cost effectively as possible.

When should you open an offshore bank or investment account?

We are finding that many South Africans have international transactional needs for both business and personal reasons, yet some are only aware of one-dimensional foreign currency accounts, often referred to as Customer Foreign Currency (CFC) accounts. This type of account allows the account holder to manage foreign receipts and payments through their local bank, but it is all subject to Exchange Control regulations.

In comparison, an offshore bank account will enable South African accountholders to conveniently receive payment for work done outside of the country, make international payments and to access international funds by way of a debit, credit or prepaid card. From here the funds can be transferred to a variety of different investment accounts, also based offshore.

While there may not be any tax liability in the jurisdiction where the account is being held, accountholders will typically still be taxable in South Africa in respect of any interest or capital gains that are earned on the account because South Africa imposes taxation on worldwide income.

South African residents are required to declare all income and assets in foreign accounts. The Common Reporting Standard (CRS) is a global information sharing regime designed to provide tax authorities with information regarding financial accounts held by local taxpayers outside of their country of tax residence. The account details, balances and interest earned will therefore automatically be shared with the South African Revenue Service (SARS).

South Africa also has strict exchange control regulations that may limit the amount of money you can transfer from South Africa or hold in foreign currency. It is therefore essential to consult a tax advisor for guidance on complying with these obligations.

In opening an offshore account, there are a number of factors to bear in mind:

• Some international banks require significant minimum deposits.
• Foreign accounts often incur high service fees, monthly charges and transaction fees.
• Required documents will include proof of identity (typically your passport), proof of address and, in some cases, financial references.
• Some banks may require applicants to open an account in person, while others are comfortable to work through a licensed service provider like Sovereign Trust, in which case, a face to face meeting will not be required.
• Some jurisdictions are identified as ‘high-risk third countries’ by organisations like the Financial Action Task Force (FATF), requiring financial institutions to apply Enhanced Due Diligence (EDD) measures to all customers, both new and existing, who are established in those countries.

When does it make sense to set up an offshore trust?

At what point should you consider setting up a trust to house the funds in your offshore bank or investment account and why? Although many of the tax benefits that were associated with trusts have been eroded by anti-tax avoidance legislation in recent years, they can still offer great advantages in the following areas:

• Preservation of your assets and legacy for future generations.
• Estate and succession planning solutions that can help to avoid lengthy and expensive probate procedures
• Enhanced asset protection in respect of potential creditors, litigation or marital breakdowns.
• Look after the needs of minor or disabled beneficiaries (special trusts).
• Ensuring your beneficiaries benefit from an asset that cannot be easily subdivided, such as a holiday house or farm.
• Separation of personal capital assets from business and trading assets.
• Provide for dependents and relatives who are incapable of managing their money or taking care of their own affairs.

If you intention is to achieve any or a combination of these goals, setting up a trust and investing in the trust’s name, may be an option. You will first need to ensure that setting up an offshore trust is cost effective.

You will need to consider the annual trustee fees (which will depend on the jurisdiction, the type of trust and also the activity levels of the trust), the amount available to invest, as well as the possible returns that can be achieved.

Corporate trustees provide a professional service that is simple and easy to use. They will carry out trust administration – the trust reporting, tax returns, accounts and registration – whilst ensuring the settlor’s and the beneficiaries’ interests are balanced appropriately.

Licensed corporate trustees must adhere to certain standards and meet various statutory obligations. They are also impartial and discreet. Importantly, they can serve as a neutral party in the event of a dispute by considering the views of all parties in equal measure.

As an absolute minimum requirement, the trust’s returns should cover the annual trustee and other annual costs associated with the trust and investment. Trust fees in Mauritius are typically the lowest, starting at USD2,000 per year.

There are a number of different countries worldwide that have enacted trust legislation but the quality and suitability of that legislation can vary. When selecting the best jurisdiction for establishing a trust it is important that it should offer:

• A strong tradition of enforcing trusts
• An English common law system
• An established reputation for trust business
• Modern legislation, including contemporary trust concepts
• Low or no taxation for trusts.

Some jurisdictions are not recommended due to legal or political uncertainties or because their courts or professionals have limited trust experience. Some jurisdictions have not kept pace with the modern trust legislation or are unsuitable because of high tax regimes.

Sovereign generally recommends that trusts are established in Cyprus, Gibraltar, Guernsey, Hong Kong, the Isle of Man, Malta, Mauritius and Singapore. Sovereign is fully licensed to act as professional trustees in all these jurisdictions.

It should also be remembered that the practical advantages of a trust are gained from the distinction that is drawn between the legal owner of property, the trustee, and those people that have the use or benefit of the property, the beneficiaries.

It is vital that the trustee remains independent and exercises proper control over the trust property. A trust may be deemed to be invalid if the settlor continues to exercise power over the trust assets by retaining benefit or control, or by giving directions to the trustees. You will therefore need to have complete confidence in your trustees.

By Coreen van der Merwe, director at Sovereign Trust (SA) Limited

The post When is the right time for South Africans to go offshore with their money? appeared first on The Sovereign Group.

Growth in Sub-Saharan Africa (SSA) is projected to edge up from 3.3% in 2024 to 3.5% in 2025 and further accelerate to 4.3% in 2026–27, according to the World Bank’s most recent regional economic update.

The World Bank said the SSA was showing some resilience, despite uncertainty in the global economy and restricted fiscal space. The median inflation rate had declined from 7.1% in 2023 to 4.5% in 2024. Countries rich in resources and those facing fragility, conflict and violence were growing more slowly than others, and the region was struggling to create enough good jobs.

Africa, it said, could also pave the way to inclusive growth by investing in its human potential. Over the next three decades, the region will experience the fastest increase in the working age population of all regions, with a projected net increase of 740 million people by 2050. Up to 12 million youth will enter the labour market across the region every year in the coming decades, but only about three million new formal wage jobs are currently created each year.

As the economies in the region recover at a faster pace in the years to come, policy should be geared toward sharing the growth benefits more equally across the population by investing in human capital, fostering economic diversification and fostering jobs-friendly economic growth.

About 464 million people in the region were still living in extreme poverty in 2024 but the per capita growth acceleration expected in 2025 to 2027, at an annual average rate of 1.8%, would contribute to a modest decline in the poverty rate. Limited investments in income-generating sectors for the poor, lingering effects of past inflation, and the probable reduction of donor aid budgets worldwide pose a challenge for poverty reduction.

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The South Africa Revenue Service (SARS) is intensifying its efforts to recover tax debts from South Africans across the board as part of a new initiative, known internally as ‘Project AmaBillions’, after the government failed to win sufficient support for its proposal for a rise in VAT.

Targeting revenues of ZAR2.006 trillion for the 2025/26 fiscal year, SARS plans to onboard up to 500 new employees initially to enhance its capacity to tackle undisputed tax debts. It is aiming to recuperate an estimated ZAR70 billion to significantly offset the forecasted ZAR75 billion shortfall cited by the National Treasury over the medium term.

SARS Commissioner Edward Kieswetter has repeatedly stressed the importance of a dedicated compliance programme to trace and address over five million unsubmitted returns, focusing on individuals who are above the income threshold but remain unregistered for tax purposes.

This focus on existing tax debts is viewed as a preferable alternative to imposing new taxes within an already fragile economic environment, with the overarching aim of bolstering state resources through diligent tax compliance and recovery efforts. SARS’s compliance initiatives generated ZAR301 billion in the 2024/25 fiscal year, a 16% increase in revenue.

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International expansion is a key strategic move for South African businesses looking beyond local borders to drive growth and diversify risk. International expansion enables South African businesses to access new customers, tap into larger markets and benefit from more stable economies. It also offers a hedge against local economic volatility and currency risks.

But beyond the corporate headline of ‘going global’ lies a more nuanced challenge. How can these business owners help their shareholders, especially minority stakeholders, to participate in offshore value creation without incurring individual costs or complexity?

According to Brandon Voges, Business Development Manager at Sovereign Trust SA, while many shareholders understand the importance of diversification, they often do not have the resources to establish their own offshore structures. “It is an uneven playing field that potentially limits shareholders’ long-term wealth creation,” he says.

Employee Share Schemes (ESSs) offer a practical way to include everyone in the team. “Instead of requiring each shareholder to establish a standalone offshore entity, a well-structured ESS can hold shares on behalf of multiple beneficiaries within a single trust. This approach reduces cost, simplifies administration, and aligns the interests of all parties involved, without sacrificing control or compliance.”

The real strategic value of ESSs

While ESSs are often associated with executive compensation or long-term incentive plans, their role in offshore structuring goes far deeper. When used as part of an international expansion strategy, they can provide a powerful mechanism for collective ownership, succession planning and tax-efficient cross-border participation.

“An ESS can be a stepping stone,” explains Voges. “It gives minority shareholders a seat at the table in the offshore structure today, and potentially allows them to graduate into private offshore arrangements in future, as and when their personal financial circumstances evolve.”

The benefits extend beyond accessibility. With the right jurisdiction and trust architecture in place, offshore ESSs can facilitate long-term estate planning, protect shareholder value across generations, and provide clarity around how future exit events or liquidity scenarios will be handled.

Just as importantly, ESSs foster deeper engagement from minority stakeholders who now have a tangible connection to the offshore entity’s performance.

Structuring an ESS that endures

ESSs are typically set up as trust structures located in offshore jurisdictions that offer an established reputation for trust business, a strong tradition of enforcing trusts, modern trust legislation and no or low taxation for trusts.

By consolidating shareholder interests through a single trust, businesses can streamline administration and reporting, ensure regulatory compliance and create long-term value for investors without the upfront burden of individual offshore set-ups. A properly structured ESS can also help with international estate and succession planning, providing continuity and safeguarding shareholder value across generations.

The trust can be used to create an internal market in shares and the assets held in a trust are not available to creditors of the business or its shareholders. Any potential conflicts of interest can also be avoided because the trustees are required to act in the interests of the beneficiaries.

Of course, these structures do not build themselves. Jurisdiction matters, as do tax considerations, regulatory requirements, and the specific terms built into the trust deed. Key decisions around vesting terms, exit conditions and dispute mechanisms need to be clearly defined from the outset.

Education is equally important. Beneficiaries need to understand more than what just what they are entitled to; they also need clarity on how the structure works, and what the long-term expectations are. It has to be crystal clear than an ESS is a strategic vehicle for long-term value creation, and not just a short-term share bonus.

“Too often, we see businesses rush into offshore structuring with the best intentions but with no clear plan for how shareholder participation will work,” says Voges. “When properly executed, an ESS provides a scalable, efficient and fair way to include all shareholders in the offshore journey – not just those with the resources to go it alone.”

ESS – a ticket to ride

For South African businesses that are serious about building globally relevant, future-proof operations, the question is no longer whether, or even when, to expand offshore. It is how to bring everyone along for the ride, and an ESS may well be the answer.

“Sovereign Group always advises business owners to partner with professionals before making any moves and, in this case, the shareholders should be part of the conversation as well,” says Voges. “If you’re looking to take your business offshore with the participation of all its shareholders, contact us to explore how an ESS can unlock inclusive, long-term value for your entire team.”

With over three decades of experience handling cross-border corporate and commercial matters, the Sovereign Group provides the comprehensive advice and support that will assist businesses of all sizes to establish operations successfully in foreign markets. Our solutions will support the long-term growth and sustainability of your business and protect and optimise the interests of all shareholders.

We also provide specialist trustee and administration services to ensure that such arrangements continue to meet the needs of the business and the interests of the beneficiaries. Sovereign is fully licensed to act as a professional trustee in Cyprus, Gibraltar, Guernsey, Hong Kong, the Isle of Man, Malta, Mauritius and Singapore.

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While South Africa’s government of national unity attempts to finalise the 2025 budget, a fierce debate has erupted over how best to raise revenue after it become clear that other parties would not support the African National Congress (ANC) plan for a 0.5% rise in VAT.

The government of national unity was formed after May elections last year stripped the ANC of its majority for the first time since the end of apartheid in 1994, forcing it to partner with the Democratic Alliance and other smaller parties.

Populist and leftist parties in parliament, backed by advisory bodies like the Parliamentary Budget Office (PBO), have argued against the VAT hike in favour of new taxes on the wealthiest 5% of earners.

But, in its formal response to the 2025 Budget proposals in March the National Treasury stated that introducing a wealth tax would “generate limited revenue and potentially endanger South Africa’s income tax base”.

It said South Africa already had a high share of personal income tax as a percentage of GDP and a high top tax rate, both of which were much higher than other developing economies.

Similarly, it said the South Africa’s corporate income tax rate was already too high. Companies already contributed more corporate tax revenue as a share of GDP than in most other countries, deterring investment and making South Africa uncompetitive.

What about a wealth tax?

South Africa already taxes wealth, said the National Treasury. Annual tax revenue from four national taxes on wealth (excluding property rates) amounted to ZAR22 billion in 2021/22, ZAR22.6 billion in 2022/23, ZAR19.4 billion in 2023/24 and ZAR21.3 billion in 2024/25 from:

• Estate duty on all assets (financial, real estate and land).
• Donation tax on asset donations.
• Security transfer tax on all equity transfers.
• Real estate transfers through transfer duty.
• Property taxes on real estate at local level.

In addition, capital gains tax raised ZAR15.6 billion to the fiscus during 2019/20, and ZAR16.4 billion in 2020/21.

Introducing a wealth tax would generate limited revenue and potentially endanger South Africa’s income tax base. The top three income tiers will pay over 60% (ZAR488 billion) of all personal income tax in South Africa for 2025/26.

“This personal income tax base is critical for fiscal sustainability, and introducing a wealth tax could potentially erode it as high-net-worth individuals are internationally mobile. If only 10% of this tax base were to change their tax residency, South Africa could lose ZAR49 billion in income tax revenue annually, plus all the other taxes they currently contribute,” said the National Treasury.

It also said that only four countries worldwide currently imposed wealth taxes and several countries had either abandoned or significantly reduced the scope of their wealth taxes in recent years because they were ineffective.

The reasons for abolishing these wealth taxes included the high cost of collection, the administrative complexity, the risk of capital flight and the limited revenue gained from these taxes.

The National Treasury supported the proposal to raise VAT, saying that the previous VAT rate increase from 14 to 15% in 2018 did raise substantial revenue, but net VAT figure of ZAR23 billion had been significantly reduced by VAT refund payments from SARS.

Rather than adding new personal or corporate income taxes, the National Treasury suggested focusing on improving compliance, closing loopholes and strengthening existing mechanisms.

The post South Africa National Treasury warns against wealth tax proposals appeared first on The Sovereign Group.

In today’s global marketplace, business success increasingly requires active trading participation in foreign markets. Emerging companies typically operate in rapidly evolving industries where expertise, speed and efficiency are rewarded, writes Rone Silke, Business Development Manager at Sovereign Trust (SA).

International expansion can add to the long-term success of businesses by enabling access to new markets and customers, driving higher sales volumes, and increasing revenue and profits. Business expansion also helps to diversify business risk, reduce dependency on a single revenue source and gain exposure to new ideas and technologies.

Modes of entry may vary – internet, exporting, licensing, commercial agents, distributors, strategic alliances, joint ventures, overseas manufacturing or sales subsidiaries – but international expansion will inevitably involve unfamiliar legislation, regulations and processes, as well as creating international legal and tax considerations.

Key factors to consider include:

• Choice of jurisdiction – you will need to evaluate the ease of doing business in the specific country by assessing the set-up procedures, available corporate structures, licence and permit requirements, and availability of utilities, business accommodation and workforce.
• Cultural challenges – companies must adapt to a wide range of potential cultural and linguistic differences, as well as business practices and regulatory environments. To navigate successfully through cultural complexities, onboarding local experts in an expansion venture can help provide cultural intelligence and valuable insights.
• Legal and regulatory compliance – you will need to select a jurisdiction with high quality legislation and regulation, a robust judicial system, good international reputation, and access to well-qualified professionals that will offer you flexibility and security.
• Financial challenges – you will need to assess the currency exchange risks, the strength of banking facilities, access to financing, the quality of investment protection, as well as the ongoing operational and maintenance costs beyond initial set-up.
• Risk management – you will need to identify and analyse potential threats or uncertainties by assessing the economic, political, technological, environmental and competitive factors that could affect your business. Organisations that embrace strategic risk management are more likely to deliver stakeholder confidence, better business outcomes and revenue growth.
• New business model – for entrepreneurs considering business expansion it is essential to adapt your business model to clarify goals, identify potential obstacles and outline the steps needed for success. This will enable you to make informed decisions that support long-term growth and sustainability while aligning with the local conditions.
• Tax benefits – international expansion can offer opportunities to reduce the tax burden of the business by gaining access to potentially lower corporate and personal income tax rates, reduced withholding taxes and import duties, tax incentives and exemptions, double taxation agreements (DTAs), as well as lower capital gains and estate or inheritance taxes.

Creating a solid business plan is essential to clarifying your goals, making informed decisions, and minimising costly mistakes. This involves conducting thorough research, setting realistic targets, and seeking guidance from local professionals who also understand the wider international context. This will enable entrepreneurs to identify potential risks and opportunities and make informed decisions that support the long-term growth and sustainability.

For further information on making a success of international business expansion, please contact Rone Silke by phone on +27 (0) 21 418 2170 or by email below.

The post What Are the Key Factors in International Business Expansion appeared first on The Sovereign Group.

South Africa boasts the most advanced, broad-based economy in sub-Saharan Africa, which offers a wide range of opportunities to South African business owners and foreign investors alike. South Africa benefits from its position as an entryway to other countries and markets in Africa while also offering sophisticated financial, legal and business services sectors.

South Africa is a destination largely conducive to foreign investment. South Africa has a population of over 60 million and a dynamic business community that is highly market-oriented and the driver of economic growth. Increasingly, the country is acting as a business incubator for new-to-market ideas; business models launched in and from South Africa generally find acceptance in many other markets.

But South African entrepreneurs need to think beyond local borders and certain challenges often restrict business expansion for businesses based in South Africa. The volatile Rand-dollar exchange rate can complicate planning, especially for smaller or new-to-market firms. Businesses with international ambitions can also face limited access to international capital or funding.

In addition, there are restrictions on outward investment, such as a ZAR1 billion (USD83 million) limit per year on outward flows per company. Larger investments must be approved by the South African Reserve Bank (SARB) and at least 10% of the foreign target entities’ voting rights must be obtained through the investment.

Forward-thinking business owners or investors need to consider the impact of these challenges on their operations and potential for expansion locally or abroad. Many business owners turn to offshore jurisdictions in which to establish or structure their interests strategically. This presents an opportunity for the local operations to continue to grow, whilst also leveraging international advantages in respect of global sales opportunities and access to foreign investment.

1. Regulatory and economic barriers
   

   Frequent policy changes together with cumbersome bureaucracy may hinder planning long-term business objectives. The restrictions placed on the movement of money in and out of South Africa tends to deter foreign investors especially where they have little or no experience in dealing with exchange controls.Further concerns relating to currency volatility and infrastructure challenges contribute to making South Africa less attractive to global investors. An offshore structure or company may help mitigate these risks and offer a more stable business friendly environment for investors.

2. Credibility and confidence

   Many international financial centres (IFCs) are well-regulated, politically stable and offer established legal frameworks that improve the ease of doing business for investors. They are efficient for investors because they offer specialised, up-to-date legal regimes and specific provisions for investment funds. Countries that come to mind include the Isle of Man, Mauritius, Singapore and the United Arab Emirates.South African businesses that establish an entity and presence offshore in a jurisdiction that is secure and transparent may increase the likelihood of securing venture capital, private equity or institutional investments.

   Effective intellectual property protection, transparency in government dealings and compliance with international standards in respect of tax and money laundering are also critical to providing investors with peace of mind and confidence. IFCs have legal systems that specialise in relevant areas of law and have passed specialised laws and regulations for business to business transactions. This creates certainty and lowers risks and costs.

3. Access to international markets

   An offshore entity in an IFC can drive economic growth and innovation. These jurisdictions provide specialised services that lower transaction costs, support investment and foster economic development both locally and globally. They provide access to global investment networks and financial ecosystems, as well to advanced banking solutions, different talent pools or customer bases.South African entrepreneurs can position their businesses to operate on a global scale, which includes access to international banks with limited or no exchange controls. The business can continue to benefit from South African talent and resources and contribute to the South African economy according to its needs.

4. Access to tax benefits

   IFCs provide tax neutral platforms for investment, meaning that they will not add an additional layer of tax to that already paid by the investors in their home countries. The result is that IFCs make it easier and cheaper to organise investments.The tax residency of the shareholders, directors and the company may impact on the integrity of the offshore structure. For entrepreneurs and business owners who are tax resident in South Africa, it is essential to take account of South African’s rules relating to Controlled Foreign Companies (CFCs), Place of Effective Management (POEM), Transfer Pricing (TP) and Base Erosion and Profit Shifting (BEPS).

   Some offshore jurisdictions impose no or low corporate income tax, no capital gains tax and do not levy any withholding taxes. It is generally the case that entities based in these jurisdictions will not comply with South African tax and exchange control laws, which may result in punitive measures and unfavourable taxation.

Structures for consideration

The correct offshore structure will depend on a variety of factors such as the business’s objectives, operational requirements, taxation and reporting obligations. The jurisdiction of choice will also have to cater for other considerations such as banking, trade and other regulatory or licensing requirements. It is important to remember that the global tax and regulatory environment is subject to constant change.

Depending on the parties involved, the commercial interests of the offshore company may be held by an offshore holding company and/or an offshore trust or foundation. Where the South African business interests are considered, there may be significant advantages for business owners who utilise an offshore holding structure to hold all or some of the shares of the South African entities.

Most South African entrepreneurs wish to remain in and operate in South Africa. The South African company can remain operational locally while the offshore structure can provide for international expansion.

An international market presence can be advantageous to your investors, partners, suppliers and customers because they offer credibility, flexibility and efficiency to their business in new markets worldwide. With proper planning and advice, this can be highly beneficial to the long-term success of the business.

The post Global Outlook: why South African entrepreneurs should consider setting up offshore to attract foreign investment appeared first on The Sovereign Group.