For private clients in South Africa, there are no Guernsey assets and the structures are not controlled by Guernsey individuals, so the tax position in Guernsey is neutral. This is a good starting point for any private client structure we are looking to undertake with a jurisdiction such as South Africa.
Guernsey broadly has a 0% corporate tax regime, there is no withholding tax on payments made to non-resident shareholders, no capital gains tax, inheritance tax, VAT or stamp duty. This forms a perfect platform for individuals in South Africa to arrange their affairs.
When working with clients and advisers in South Africa, several drivers lead them to Guernsey to structure their tax affairs, and three main drivers that underpin our planning.
The first, succession planning, has become more relevant over the last couple of decades as families have become more internationally mobile. As a result, having assets structured in Europe is becoming more important. Then there is asset protection, and hedging against the Rand and volatility in South Africa.
I would recommend that any HNWI in South Africa should consider a foreign trust as part of their financial planning.
When I have met with clients looking to structure, they often intend to have all their assets based in South Africa. We work on a case-by-case basis with advisers in South Africa and professionals in Guernsey to provide a bespoke solution tailored to each family circumstance, which meets all our main drivers. It also allows for tax deferral on any growth made within the structure. I would recommend that any HNWI in South Africa should consider a foreign trust as part of their financial planning.
Developments over the last few years have put Guernsey front and centre as a jurisdiction of choice to structure these foreign trusts. In 2017, screening was undertaken on tax transparency, fair taxation and anti-BEPS measures, with which Guernsey is fully compliant.
Substance regulations form part of Guernsey law to address these concerns. Guernsey needs to be the base for the direction and management of all in-scope companies, for applicable core income generating activity, to have adequate levels of expenditure and appropriately-qualified employees in the island, and have an adequate physical presence in Guernsey, all proportionate to the level of activity carried out here.
Even before these requirements came in, Guernsey had these measures in place, giving it a head start over its competitors. Our clients should have great confidence that we have the regulation, a track record of getting things right, and a pool of professionals on the island to bring this all together.
Times are difficult at the moment, which places a premium on getting the right advisers in place to establish a structure that adds value to the client. Everyone can be a winner from this.