Foreign residency as 'Plan B' - this is where South Africans are heading

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Portugal is popular with many South Africans looking for a path to European Union residency.
Portugal is popular with many South Africans looking for a path to European Union residency.
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  • For the past decade, the major trend in the South African investment space has been the growing number of local investors looking to offshore investments to hedge their earnings against a volatile rand.
  • The next big trend is a strong interest in residency or citizenship by investment programmes, says a director of Sovereign Trust SA, an international firm specialising in corporate structuring.
  • Portugal, Mauritius, Cyrus and the Seychelles are among the popular options. 


There's a misconception that people invest in residency and citizenship by investment (RCBI) programmes with the sole intention of enabling their families to emigrate, according to Coreen van der Merwe, a director of Sovereign Trust SA, an international firm specialising in corporate structuring. 

While this is a requirement of certain programmes – the UK and US, for example – in most instances it is not the case. 

"For the past decade, the major trend in the South African investment space has been the growing number of local investors looking to offshore investments to hedge their earnings against a volatile rand. Now, we're seeing the next big trend: a strong interest in RCBI programmes, as people look for a second residency or citizenship for personal and business reasons," says Van der Merwe.

"We're seeing Portugal and Mauritius emerging as two of the most popular destinations for South Africans not only looking for a so-called 'Plan B', but also looking to benefit from greater tax efficiency, investment and business opportunities, improved lifestyles, education options and greater freedom of movement."

Portugal

Portugal is popular with many South Africans looking for a path to European Union residency – and citizenship - for themselves and their families. Real estate investment remains one of the easiest, with a minimum investment of €500 000 - reduced to €400 000 if the real estate is located in a designated area of low GDP or low population density.

Dr Andrew Golding, chief executive of the Pam Golding Property group, says in 2021 its first clients successfully completed their journey through Portugal's programme and received citizenship in Portugal and of the EU.

"The main motivation is the ability to enable opportunities for their children to study, live and work internationally," says Golding.

Mauritius 

Part of the attraction of Mauritius for foreign investors has always been its simple taxation system, according to Van der Merwe. Company, personal income, capital gains and dividend incomes are all taxed at a rate of 15%, with further tax concessions available. Mauritian tax residents are taxed on Mauritius-sourced income only, and there is no capital gains tax, no property tax and no inheritance tax. 

Regarding non-Mauritian sourced incomes, one is only taxed on the funds which are brought into a Mauritius account. In addition, there are no foreign exchange controls. 

"South Africans are already among the leading foreign buyers of property on the island and there's already a sizeable community of South African expats," says Van der Merwe.

Cyprus

The Cyprus government recently presented its new action plan for attracting businesses to Cyprus with an emphasis, among others, on high technology, shipping, innovation, and research and development, in a bid to turn the island into a sustainable business and trade centre in the wider region and Europe, according to Van der Merwe.

The scheme allows for the employment of third-country nationals who have the required academic skills or at least two years of relevant experience and are paid a minimum gross monthly salary of €2 500 (roughly R45 000). Third-country nationals that have secured a residence and work permit will have the right to bring their family to Cyprus and there will be immediate and free access to the Cyprus job market for spouses and partners.

South Africans who wish to live in Cyprus but work for companies operating abroad could qualify for a new type of residence permit to be introduced.

"South Africans who are self-employed or employees who work remotely using information and communication technologies, with employers or clients outside Cyprus will benefit greatly," says Van der Merwe. The initial allocation is for a maximum of 100 visas.

To qualify for a visa, an individual must have a minimum income from overseas of at least €3 500 per month – increased by a further 20% for a spouse and by 15% for any minor child – hold medical insurance and have a clean criminal record certificate from their country of residence.

Individuals granted a "digital nomad visa" will have the right to stay in Cyprus for up to one year, with the right to renew for another two years. They may be accompanied by their family members, to whom a residence permit may be granted, upon request, that expires at the same time as that of the visa holder.

The spouse or partner and minor children of the digital nomad visa holder may not work or engage in any kind of economic activity in Cyprus. If they stay in Cyprus for a period that exceeds 183 days during the same tax year, they will be considered tax residents of Cyprus, provided they are not tax residents elsewhere.

Seychelles

Golding says Pam Golding Properties' sales in the Seychelles have been consistent throughout the pandemic.

"We are in 2021 to date about 30% up on sales compared to 2020. We anticipate ongoing interest from a lifestyle, dollar-based investment and offshore property purchase point of view, with more and more people able to work remotely allowing them the opportunity to live an island lifestyle for part of the year," he explains.

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