EventsFinancial Planning

FISA talks fiduciary on the offshore game

By: Katya Stead, freelance financial services journalist

The highlights of last week’s annual FISA conference.

The 7th annual Fiduciary Institute of Southern Africa (FISA) conference, held at Sandton Convention Centre last week, had three clear themes running through it: the tax repercussions of offshore assets, the more local implications of section 7C and other regulation and the ethics underpinning it all.

In a time of uncertainty in South Africa where more and more clients want offshore wealth accumulation, the day was full of interesting revelations about what tax practitioners have to deal with after a local client passing on with some international assets. Among those dealt with were the finer implications of investing in Silicon Valley, resorts in Mauritius and land in Namibia.

The day’s presentations are available for viewing on the FISA website.

Eight speakers participated in this conference with the theme: “A complex and mobile world – are you fit enough?” The day started decidedly offshore, with the first four presenters of the day dealing with international fiduciary implications – from South African investors with assets in the UK, resort property in Mauritius, shares in US companies and land in Namibia.

First up was Oliver Phipps of Lester Aldridge Solicitors, UK, discussed multi-jurisdictional estate planning and administration. He looked at three aspects of individuals holding assets in a foreign country: whether a separate will is required for those assets, practical examples of estate administration and tax considerations. He briefly explained how the European Succession Regulation (also known as Brussels IV) allows an individual to elect for the law of his/her nationality to apply to the succession of assets in order to avoid forced heirship rules. He explained how estate administration works by way of several practical examples and discussed UK inheritance tax and US estate tax in relation to these assets.

Things got more tropical when Gordon Stuart of Accuro Fiduciary, Mauritius, discussed multi-jurisdictional estate planning. He explained that Mauritian law governs the succession of immovable property in Mauritius and the Mauritius forced heirship rules that give a very sizable portion of an estate to their children – anything from 50 percent to a whopping 75 percent. He recommended South Africans with assets in Mauritius have a separate will to deal with the unreserved portion of those assets, but cautioned that drafting a will in Mauritius is more complicated than in South Africa. Mauritius does not recognise joint wills and only a notary public can draft a will. A will drafted outside of Mauritius is only enforceable if it is duly registered in Mauritius. He echoed Oliver Phipps’ recommendation that expert advice be sought.

Arguably the most talked-about presentation of the day came from Mathys du Preez of Sanlam, Namibia, who discussed cross-border estate planning in Southern Africa. The unexpectedly sunny job of being a tac practitioner comes part and parcel with no donations tax, no estate duty and no capital gains tax. Who knew?

However, he did also warn that legislation in Namibia that gives the State a preferential right to acquire agricultural land whenever the owner of such land intends to alienate the land and cautioned that this also applies when the owner of the land dies. One difference between SA and Namibia when a deceased estate is administered is that the Master of the High Court in Namibia requires that the executor of the estate must be a local Namibian or have a Namibian agent. Namibia has a source-based income tax system and trusts are taxed according to the tax tables that apply to individual taxpayers.

Thereafter, the rest of the day was reserved mostly for matters of the heart and creating soundly ethical fiduciary best practice. Professor Willie van der Westhuizen of Millers Attorneys in George spoke about trustees and conflict of interest. Professor Bradley Smith of the Law Faculty of the University of the Free State discussed the intersection between trust law and matrimonial property law. Professor Piet Naudé of the University of Stellenbosch Business School spoke about ethical behaviour in an unethical environment.

Another important topic dealt with was regulation. Leonard Pule, the Master of the High Court, Johannesburg, also gave a regulatory update. He briefly discussed Regulation 910 that deals with persons who may administer estates, Chief Master’s Directive 2 of 2017 in respect of the requirement for an independent trustee in some trusts, fees payable to the Master, and certain operational issues.

Jan Coetsee of PricewaterhouseCoopers spoke about section 7C of the Income Tax Act. He explained the history and the mechanism of section 7C and looked at some exemptions from the section. He also briefly looked at the proposed extensions to section 7C as published in the Draft Taxation Laws Amendment Bill, 2017.

The day was concluded with an hour-long panel discussion during which the audience posed questions to all speakers.

For those interested in the details, the day’s presentations are available for viewing on the FISA website.

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