Is a global corporate minimum tax the death knell for offshore structuring?

22 April 2024 ,  André van NiekerkFrancois Fouché 228
Despite uncertainties surrounding global tax reforms, no additional restrictions on exchange control have been proposed in South Africa during the 2024 National budget speech. However, amidst this positive news, concerns linger among taxpayers regarding the introduction of a new effective minimum tax rate of 15% on multinational corporations, sparking questions about its impact on offshore structuring and international estate planning structures, as well as the continuing effectiveness of low tax jurisdictions also known as financial centres. This article delves into the implications of these developments specifically offshore structuring and estate planning strategies.

In the ever-evolving landscape of offshore structuring, the interplay between exchange control regulations and global tax policies can have significant implications for South African individuals and businesses having offshore structures, as governments worldwide continue to enact measures aimed at curbing tax evasion and fostering greater transparency. Central to this discussion are two key elements, namely exchange control mechanisms and the concept of a global corporate minimum tax. 

Despite uncertainties surrounding global tax reforms, the lack of additional restrictions on exchange control means that individuals are still free to externalise funds using the discretionary allowance and the annual investment allowance, which both present a favourable opportunity for South Africans to diversify assets offshore.

However, amidst this positive news, concerns linger among certain taxpayers regarding the introduction of a new effective minimum tax rate of 15% on multinational corporations, sparking questions about its impact on offshore structuring and international estate planning structures, as well as the continuing effectiveness of low tax jurisdictions also known as financial centres. 

It is imperative to clarify that this tax rate has a specific application, only affecting multinational corporations with a turnover exceeding Euro 750,000,000 per annum. Consequently, typical business structures commonly used by small and midsize enterprises and by individuals as part of their estate planning strategies are unlikely to be impacted.

This means that international structuring for South African small and midsize enterprises and estate planning structures utilising entities incorporated in financial centres remain attractive, with the continuing value for offshore financial centres anticipated for the foreseeable future.

In summary, the above-discussed amendments may not currently impact offshore structuring for individuals and small to medium enterprises, however, global tax reforms may introduce changes in future. South African citizens should therefore leverage offshore opportunities for asset diversification, strategic planning and estate planning, but must do so in thorough consultation with advisors as it remains crucial to navigate evolving regulatory landscapes effectively.

For help in establishing an integrated offshore and local estate planning strategy and align such with applicable regulatory and reporting requirements, don’t hesitate to make contact with our Estate Planning Team.

Visit our Estate Planning Team page.


Disclaimer: This article is the personal opinion/view of the author(s) and is not necessarily that of the firm. The content is provided for information only and should not be seen as an exact or complete exposition of the law. Accordingly, no reliance should be placed on the content for any reason whatsoever and no action should be taken on the basis thereof unless its application and accuracy have been confirmed by a legal advisor. The firm and author(s) cannot be held liable for any prejudice or damage resulting from action taken on the basis of this content without further written confirmation by the author(s). 
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