Why some South Africans choose to invest offshore in a foreign currency
For South Africans exploring offshore investing, there’s more than one way to go about it. Some choose to invest in global markets using rands, while others prefer to hold their investments directly in a foreign currency like US dollars.
Both options give you access to a broader and deeper world of investment opportunities. In long-term funds, such as the Coronation Global Managed Fund, you typically gain exposure to a variety of assets in multiple countries and currencies.
Reporting and tax implications
The currency you choose when investing offshore affects how your returns are reported. If you invest in rands, your returns are translated and reported in rands.
If you invest in dollars, euros, or another foreign currency, they’re reported in that currency instead.
This leads to a difference in tax treatment under current legislation. In a rand-denominated fund, any capital gains or losses that occur due to exchange rate movements between the rand and other currencies will be included in your taxable amount when you realise your investment.
In a foreign currency-denominated fund, exchange rate movements are excluded from the capital gains calculation.
Currency and future spending
If you’re planning for future expenses in a specific currency, such as an overseas education, travel, or supporting family abroad, you can also invest in a currency-hedged fund class, where the effective currency exposure will always be the same as the fund’s reporting currency.
Currencies may strengthen or weaken over time, but by holding your money in the currency you plan to use down the line, you avoid the uncertainty of future exchange rate swings.
For example, the Coronation Global Capital Plus Fund offers dollar, euro, and pound hedged classes for this purpose.
Regulatory diversification
Investing offshore in a fund established under the laws of another country adds another layer of diversification to your portfolio.
Instead of sitting within the South African financial system, your investment is held in a different legal and regulatory environment, with its own financial rules and protections.
Coronation’s offshore funds operate from Ireland, which is one of the premier fund domiciles in the world.
Understand your allowances
If you’re considering investing offshore in dollars, it helps to understand how much you’re allowed to move abroad (externalise) and what the process involves.
Every South African over the age of 18 has access to a single discretionary allowance of up to R1 million per calendar year.
This allows you to transfer funds overseas without needing prior approval from the South African Reserve Bank or SARS.
Once the money is offshore, you can choose to invest it, save it, or spend it. It’s up to you. But there’s one important detail: any spending on your credit or debit card while travelling overseas also counts towards your R1 million limit.
So, if you’ve spent R200 000 in travel-related card expenses, only R800 000 remains available for transfers or offshore investing for that year.
If you’re looking to invest more than R1 million offshore in a year, you can access an additional R10 million foreign investment allowance.
To do this, you must be a registered South African taxpayer, be in good standing with SARS, and successfully apply for a tax clearance certificate for foreign investment.
Investing offshore doesn’t have to be complicated
For some South African investors, the idea of investing offshore can feel out of reach due to perceived complexity, high minimums, or uncertainty about where to start. But the landscape is changing.
Over the past few decades, global markets have become more accessible, and investing offshore is now far more straightforward than it once was.
One of the biggest shifts has been around minimum investment amounts. For example, if you’re planning on investing offshore in foreign currency, Coronation allows you to start with as little as $500 (or €500 or £500).
That means you don’t need a large lump sum to take part of your portfolio global.
As access improves, the focus shifts to how you invest — and how to make decisions that support your long-term goals. An experienced global investment partner can provide access to a range of funds and markets, along with expertise shaped by decades of managing offshore portfolios for South African investors.
It’s always worth chatting to your financial adviser about how investing offshore might fit into your broader plan.
Coronation is an authorised financial services provider.
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