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South Africa applies a residence-based tax system, which means that residents of the country are taxed on their worldwide income. However, relief is granted for foreign taxes paid on income earned in foreign jurisdictions, but only up to the amount of the equivalent South African tax payable on such income. Non-residents are taxed on the source basis, such that only income accruing from a South African source is taxable in South Africa.

A company, trust or similar entity is deemed to be a resident if it is incorporated, established, formed or has its place of effective management in South Africa.

A dual system for the taxation of companies exists in South Africa, one part being on taxable income and the other on distributed profits. The tax is levied as follows:

If the branch of a foreign company establishes a place of business or owns immovable property in South Africa, it is regarded as an ‘external company’ and must be registered as such. Sovereign Trust (SA) can assist with this process.

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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.

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