Are foreign trusts still relevant for South Africans?
The role of foreign trusts in the structuring of foreign affairs of South African residents is changing, says international family wealth manager Stonehage Fleming. Foreign trusts will always have a broad benefit for wealthy families with complex, international affairs and should not be used to mitigate tax, but rather to maximise the wealth protection and estate planning opportunities. Foreign trusts are no longer the only option for investors looking to remit funds from South Africa, due to a changing international tax environment coupled with the recent focus by SARS on both local and foreign trusts.
More specifically, with the implementation on March 1 2017 of Section 7C of the Income Tax Act, which addresses low or no interest loans to trusts, the 2018 tax year marks the first year where South African taxpayers are subject to a Section 7C liability. Additionally, it was proposed in the 2018 Budget Speech that the ‘official rate of increase’ (which is also the rate used to calculate Section 7C donations) be upwardly revised to be more aligned with a market-related rate. A change in this ‘official rate of interest’ will necessitate a review of whether the interest rate applicable to existing loans needs to be adjusted, and where Section 7C applies to a loan to a trust, it will also result in an increased donation and therefore donations tax liability.
Further developments include the rising costs of administration and management of foreign trusts due to heightened governance, compliance and reporting functions of trustees, as well as the growing trend of remitting funds offshore (over and above the R10 million available through the annual foreign investment allowance) by way of special applications to the South African Reserve Bank. These special application funds cannot be lent to a trust and must be invested in the name of the applicant, which may deem the costs of establishing and maintaining a foreign trust unwarranted to house only a small portion of the taxpayer’s foreign funds remitted from South Africa.
“In determining the tax implications of a foreign trust where a loan is in place which is not attracting interest at a market-related rate, the relationship between three primary tax principles must be considered – transfer pricing provisions, attribution rules and the new Section 7C,” says Elana Nel, senior associate in the tax advisory division at Stonehage Fleming in South Africa.
In Profile: Stonehage Fleming
“In a sense, we are an outsourced family office, as we will do whatever the family itself doesn’t want to do, from everything to very little,” explains Clarke-Jervoise.
He adds that the firm’s services lean more towards fully discretionary services than solely advisory, though there is a mix between the two for many clients.
Clarke-Jervoise spends all his time on private equity in a team of four and says that of the 250 clients Stonehage Fleming has, 40-50 would like help on their private equity investing. Those clients that do wish to invest in the asset class have roughly 10-25% of their assets in private equity. Last year the family office deployed circa $100m into private equity.
Are foreign trusts still relevant for South Africans?
The role of foreign trusts in the structuring of foreign affairs of South African residents is changing, says international family wealth manager Stonehage Fleming. Foreign trusts will always have a broad benefit for wealthy families with complex, international affairs and should not be used to mitigate tax, but rather to maximise the wealth protection and estate planning opportunities. Foreign trusts are no longer the only option for investors looking to remit funds from South Africa, due to a changing international tax environment coupled with the recent focus by SARS on both local and foreign trusts.
More specifically, with the implementation on March 1 2017 of Section 7C of the Income Tax Act, which addresses low or no interest loans to trusts, the 2018 tax year marks the first year where South African taxpayers are subject to a Section 7C liability. Additionally, it was proposed in the 2018 Budget Speech that the ‘official rate of increase’ (which is also the rate used to calculate Section 7C donations) be upwardly revised to be more aligned with a market-related rate. A change in this ‘official rate of interest’ will necessitate a review of whether the interest rate applicable to existing loans needs to be adjusted, and where Section 7C applies to a loan to a trust, it will also result in an increased donation and therefore donations tax liability.
Further developments include the rising costs of administration and management of foreign trusts due to heightened governance, compliance and reporting functions of trustees, as well as the growing trend of remitting funds offshore (over and above the R10 million available through the annual foreign investment allowance) by way of special applications to the South African Reserve Bank. These special application funds cannot be lent to a trust and must be invested in the name of the applicant, which may deem the costs of establishing and maintaining a foreign trust unwarranted to house only a small portion of the taxpayer’s foreign funds remitted from South Africa.
“In determining the tax implications of a foreign trust where a loan is in place which is not attracting interest at a market-related rate, the relationship between three primary tax principles must be considered – transfer pricing provisions, attribution rules and the new Section 7C,” says Elana Nel, senior associate in the tax advisory division at Stonehage Fleming in South Africa.
In Profile: Stonehage Fleming
“In a sense, we are an outsourced family office, as we will do whatever the family itself doesn’t want to do, from everything to very little,” explains Clarke-Jervoise.
He adds that the firm’s services lean more towards fully discretionary services than solely advisory, though there is a mix between the two for many clients.
Clarke-Jervoise spends all his time on private equity in a team of four and says that of the 250 clients Stonehage Fleming has, 40-50 would like help on their private equity investing. Those clients that do wish to invest in the asset class have roughly 10-25% of their assets in private equity. Last year the family office deployed circa $100m into private equity.
Eight Wealth Managers; most recent fund buys
Tristan Dolphin, Senior Associate at Stonehage Fleming said: “Our most recent equity fund investment was in the Vulcan Value Equity fund in August last year. Vulcan’s differentiated approach to investing with a focus on quality and price appealed to us”.
Stonehage Fleming bolsters Jersey
Commenting on the appointment, partner and head of family office in Jersey, Ana Ventura, said the hiring of Bodenstein ‘reflects the growing importance of Jersey to the group’. She added: ‘The needs of our clients are constantly evolving and Rudi’s experience will contribute significantly to our already existing talented and dedicated team, as well as the strategic vision we have for Stonehage Fleming as the international family office.’
People Moves: Stonehage Fleming
Bodenstein comes to Stonehage from Guernsey-based wealth manager FNB International Trustees, a part of South Africa’s FirstRand National Bank, where he spent eight years developing its fiduciary and advisory business.
Eight Wealth Managers; most recent fund buys
Tristan Dolphin, Senior Associate at Stonehage Fleming said: “Our most recent equity fund investment was in the Vulcan Value Equity fund in August last year. Vulcan’s differentiated approach to investing with a focus on quality and price appealed to us”.
Stonehage Fleming bolsters Jersey
Commenting on the appointment, partner and head of family office in Jersey, Ana Ventura, said the hiring of Bodenstein ‘reflects the growing importance of Jersey to the group’. She added: ‘The needs of our clients are constantly evolving and Rudi’s experience will contribute significantly to our already existing talented and dedicated team, as well as the strategic vision we have for Stonehage Fleming as the international family office.’
People Moves: Stonehage Fleming
Bodenstein comes to Stonehage from Guernsey-based wealth manager FNB International Trustees, a part of South Africa’s FirstRand National Bank, where he spent eight years developing its fiduciary and advisory business.
Stonehage Fleming Continues its Expansion in Jersey
Stonehage Fleming, one of the world’s leading independently owned family offices, announces the appointment of Rudi Bodenstein as Director within the Family Office division in Jersey.
With nearly 30 years industry experience, Rudi joins Stonehage Fleming from FNB International Trustees Ltd where, as Director, he spent eight years developing and implementing business strategy for the expansion of the fiduciary and advisory business. Before relocating to Jersey in 2008, Rudi was a Partner in a South African law firm and Attorney of the High Court of South Africa for eighteen years and specialised in litigation, trust and estate planning, personal and family law as well as international structuring.
Rudi will work closely with Paul Roper, Partner, to develop and drive forward the ‘Emerald Offering’, which is the Group’s in-house Trust and Investment service designed to offer a competitive solution to solve the intergenerational succession planning and wealth preservation requirements of clients and their families who may not require the full Family Office service.
Commenting on the appointment, Ana Ventura, Partner and Head of Family Office, Jersey said: “I am pleased to welcome Rudi to Stonehage Fleming and his appointment reflects the growing importance of Jersey to the Group. The needs of our clients are constantly evolving and Rudi’s experience will contribute significantly to our already existing talented and dedicated team, as well as the strategic vision we have for Stonehage Fleming as The International Family Office.”
Rudi Bodenstein said: “As the largest multi-family office in Europe, Stonehage Fleming offers an award-winning proposition and boasts an impressive international client base. The Group are true pioneers within the family office industry and I look forward to developing the Emerald offering. It is an exciting time for the company and I am excited to be a part of the journey.”
Building wealth across generations – the four pillars of capital
Building up great wealth is one thing; holding onto it through multiple generations is another as borne out by the UK’s latest The Sunday Times Rich List. Analysis of the data by the Centre for Economics and Business Research showed that Britain’s very rich are a changing cast of characters with two thirds having only entered the list since 2000.
“This debunks the popular idea that great wealth is largely inherited, and gives credence an old English saying “from clogs to clogs in three generations”, says Johan van Zyl, CEO of Stonehage Fleming in South Africa.
“It takes great energy and ability to raise a person’s material wealth status; however these two traits are often not continued further down the generational line.
Read full article via Money Marketing
Why now is a good time to take your money offshore
Independent international family office; Stonehage Fleming South Africa says that wealthy South African investors should look to invest 100% of their long-term surplus assets offshore.
Surplus assets need to be defined for each individual or family, taking into account their total wealth and their unique long-term strategy and risks.
The process is then about understanding assets that would not be required in South Africa for at least the next ten to fifteen years. It is important to retain sufficient assets to live comfortably, whilst preserving a buffer for business interests and unexpected contingencies.
Read more via BusinessTech
Art buyers find few investment masterpieces
“Owning and managing an art collection is a complex business, requiring investment of time and advice from a variety of experts,” says Steve Kettle, partner at wealth manager Stonehage Fleming, which advises its clients on their art as well as other assets.
“Many of these experts will have their own agenda and, unlike investment management, the art world is almost entirely unregulated. This means it is one of the most manipulated markets in the world. You only know the actual value of a piece of art once it is sold.”
Read more via Financial Times
Stonehage Fleming Continues its Expansion in Jersey
Stonehage Fleming, one of the world’s leading independently owned family offices, announces the appointment of Rudi Bodenstein as Director within the Family Office division in Jersey.
With nearly 30 years industry experience, Rudi joins Stonehage Fleming from FNB International Trustees Ltd where, as Director, he spent eight years developing and implementing business strategy for the expansion of the fiduciary and advisory business. Before relocating to Jersey in 2008, Rudi was a Partner in a South African law firm and Attorney of the High Court of South Africa for eighteen years and specialised in litigation, trust and estate planning, personal and family law as well as international structuring.
Rudi will work closely with Paul Roper, Partner, to develop and drive forward the ‘Emerald Offering’, which is the Group’s in-house Trust and Investment service designed to offer a competitive solution to solve the intergenerational succession planning and wealth preservation requirements of clients and their families who may not require the full Family Office service.
Commenting on the appointment, Ana Ventura, Partner and Head of Family Office, Jersey said: “I am pleased to welcome Rudi to Stonehage Fleming and his appointment reflects the growing importance of Jersey to the Group. The needs of our clients are constantly evolving and Rudi’s experience will contribute significantly to our already existing talented and dedicated team, as well as the strategic vision we have for Stonehage Fleming as The International Family Office.”
Rudi Bodenstein said: “As the largest multi-family office in Europe, Stonehage Fleming offers an award-winning proposition and boasts an impressive international client base. The Group are true pioneers within the family office industry and I look forward to developing the Emerald offering. It is an exciting time for the company and I am excited to be a part of the journey.”
Building wealth across generations – the four pillars of capital
Building up great wealth is one thing; holding onto it through multiple generations is another as borne out by the UK’s latest The Sunday Times Rich List. Analysis of the data by the Centre for Economics and Business Research showed that Britain’s very rich are a changing cast of characters with two thirds having only entered the list since 2000.
“This debunks the popular idea that great wealth is largely inherited, and gives credence an old English saying “from clogs to clogs in three generations”, says Johan van Zyl, CEO of Stonehage Fleming in South Africa.
“It takes great energy and ability to raise a person’s material wealth status; however these two traits are often not continued further down the generational line.
Read full article via Money Marketing
Why now is a good time to take your money offshore
Independent international family office; Stonehage Fleming South Africa says that wealthy South African investors should look to invest 100% of their long-term surplus assets offshore.
Surplus assets need to be defined for each individual or family, taking into account their total wealth and their unique long-term strategy and risks.
The process is then about understanding assets that would not be required in South Africa for at least the next ten to fifteen years. It is important to retain sufficient assets to live comfortably, whilst preserving a buffer for business interests and unexpected contingencies.
Read more via BusinessTech
Art buyers find few investment masterpieces
“Owning and managing an art collection is a complex business, requiring investment of time and advice from a variety of experts,” says Steve Kettle, partner at wealth manager Stonehage Fleming, which advises its clients on their art as well as other assets.
“Many of these experts will have their own agenda and, unlike investment management, the art world is almost entirely unregulated. This means it is one of the most manipulated markets in the world. You only know the actual value of a piece of art once it is sold.”
Read more via Financial Times