Cross-Border Investing

Accessing global investment markets can be a highly effective strategy that enables investors to manage risk through asset diversification. However, cross-border investing involves understanding and complying with different tax rules and regulations across multiple regions.

This guide provides an overview of investment structure types and key considerations when looking into cross-border investing.

Understanding cross-border investment structures

The starting point will usually be to decide on the most suitable investment structure to hold and manage your global investments.  The main options are:

Personal – If you hold investments in your own name across different regions, this is the simplest structure with less regulatory and reporting requirements. The downside to this choice is that it offers less asset protection compared to other structures.

Corporate – Setting up a registered company is another structure you might consider, to separate your personal assets and company assets for management internationally. There are more regulatory and administrative requirements than a personal structure, but greater asset protection is a major benefit. This structure can also be more tax efficient in some cases.

Trust-based ownership – Trust structures are often used for effective succession planning and these are generally more complex in terms of reporting and regulatory obligations.

Certain jurisdictions outside the UK may offer tax efficiencies depending on individual circumstances and applicable regulations

Tax considerations when investing internationally

International investing involves additional tax considerations, including how tax residency status impacts tax obligations. Many countries apply tax on worldwide income and tax may need to be reported in multiple jurisdictions.

You may also be subject to rules around withholding taxes, where tax is deducted at the source before the investor receives the income. Some countries also have double tax treaties which prevent investors from being taxed twice on the same income.

The timing of investments is another important factor that has a significant impact on taxation, particularly for capital gains tax and deciding when to sell assets.

Currency risk and international diversification

Diversifying investments is a strategy many investors use to minimise risk exposure so that there is no reliance on one single market. Another consideration for cross-border investors is the impact of exchange rate fluctuations, and these must be carefully monitored and managed to minimise the impact on returns.

Accessing global markets and asset classes

You can access more asset classes and global markets such as overseas equities, funds and private markets to benefit from emerging investment opportunities outside of your resident country. To do this successfully, it is important to understand the local market rules and any restrictions that apply.

Compliance and regulatory requirements

The most important consideration for cross-border investing is ensuring that you meet your compliance and regulatory requirements across different jurisdictions worldwide to avoid potential penalties for non-compliance. This includes adhering to disclosure rules for offshore investments and ensuring suitability across different regulatory regimes.

Ongoing monitoring and portfolio rebalancing

Monitoring and managing your portfolio and rebalancing assets is more complex when investing in different regions using a range of currencies. With more variables to consider, continual monitoring of market performance, currencies and economic conditions is essential.

If personal circumstances change, investors may need to reassess their finances and adjust allocations to suit changes such as preparing for retirement or getting married.

Cross-border investing can provide access to stronger performing markets but managing your investments across different jurisdictions requires legal and regulatory expertise.

Speak to our investment professionals at Nedbank Private Wealth for guidance on setting up efficient structures, mitigating risks, staying compliant and preserving your wealth.