Irish Domiciled ETF implications

[pensivemortal]

I have a company in the USA and earn in USD.
I'd love to start investing into ETFs directly without first converting $$$ to ZAR.
The plan is to get a personal bank account at Zenus Bank and sign up for Interactive Brokers. (IB no longer accepts Wise accounts)
Then dollar cost average into ETFs (simple 3-fund portfolio) on a weekly basis.

Questions:
a) USA has a pretty hefty federal estate tax of 40% (first $60k excluded) - thus it will really suck for my wife & kids if I die.
I've read that Ireland domiciled ETFs minimizes this. What % will the tax man take if I go the Ireland route?

b) I assume only dividend & capital gains tax would apply?

c) Do I have to register for any taxes in Ireland?

d) I'm a missing maybe another investment vehicle that could potentially be better?
Read something about life insurance wrappers.

Would appreciate any advice!

 

[JayM]

If you're ZA resident, you need to bring the money back into ZAR before converting to USD. Furthermore, if you own >10% of that company, it's likely to be deemed a controlled foreign company and the company itself may have tax liability in SA.

Ireland domiciled ETFs do indeed work around the 40% SITUS issue. 0% estate duty in Ireland but you'll still be liable for SA IHT. Fill out a W8 form on IB to reduce the US 30% dividends withholding tax to 15%. You can offset that amount against tax due to SARS (25/45 rule, which means a further 5% to SARS if you're in the max tax bracket).

You don't need to register for any taxes in Ireland.

 

[Snyper564]

If you're ZA resident, you need to bring the money back into ZAR before converting to USD. Furthermore, if you own >10% of that company, it's likely to be deemed a controlled foreign company and the company itself may have tax liability in SA.

Ireland domiciled ETFs do indeed work around the 40% SITUS issue. 0% estate duty in Ireland but you'll still be liable for SA IHT. Fill out a W8 form on IB to reduce the US 30% dividends withholding tax to 15%. You can offset that amount against tax due to SARS (25/45 rule, which means a further 5% to SARS if you're in the max tax bracket).

You don't need to register for any taxes in Ireland.

Also my bigger concern would be that your tax questions indicate a slight lack of knowledge in this area and you might have gone a step further than creating just a CFC you might have triggered a place of effective management issue for that US company especially if its more of a "shell/post box" highly recommend getting a tax consultant for this well versed in international tax.

In short your US company is a SA tax resident.

 

[pensivemortal]

@JayM thanks for the the information!

>In short your US company is a SA tax resident.
Yes, I have consulted experts on this topic and completed analysis of requirements regarding the business.
Note that business is flow-through entity (LLC partnership) so retained profits flow directly to me personally. I pay taxes in USA & RSA on this.

Thus my questions is only related to investing the profits.

>If you're ZA resident, you need to bring the money back into ZAR before converting to USD.
Do I have to convert to ZAR or simply send in USD to South African bank foreign currency account?
I wish to avoid converting USD->ZAR->USD due to fees/losses at each step.

 

[JayM]

@JayM thanks for the the information!

>In short your US company is a SA tax resident.
Yes, I have consulted experts on this topic and completed analysis of requirements regarding the business.
Note that business is flow-through entity (LLC partnership) so retained profits flow directly to me personally. I pay taxes in USA & RSA on this.

Thus my questions is only related to investing the profits.

>If you're ZA resident, you need to bring the money back into ZAR before converting to USD.
Do I have to convert to ZAR or simply send in USD to South African bank foreign currency account?
I wish to avoid converting USD->ZAR->USD due to fees/losses at each step.

My understanding is that you need to convert to ZAR then back again.

 

[Tomtomtom]

Read up on our capital control regime. There is a rule where foreign money must be "offered" to a local bank within 30 days of receipt.

This does lead to the banks doing very well on forex commission.

Supposedly, we are dismantling capital controls. Too slowly imo. But it may be this rule is already no longer enforced in practice...

 

[smc]

Read up on our capital control regime. There is a rule where foreign money must be "offered" to a local bank within 30 days of receipt.

This does lead to the banks doing very well on forex commission.

Supposedly, we are dismantling capital controls. Too slowly imo. But it may be this rule is already no longer enforced in practice...

It's more complex than that. What needs to done depends on what the source of the money is, and under what regulation is or was or is held overseas. If in doubt, get professional advice. E.g., for foreign earned income, the Currency and Exchanges Manual says:

Foreign earned income
(i) Private individuals (natural persons) resident in South Africa are exempted from the provisions of Regulations 6 and 7 in respect of foreign earned income with effect from 1997-07-01 (i.e. income earned on approved foreign assets or in respect of services rendered to non- residents while physically abroad), with the exception of the proceeds of merchandise exports, which must be repatriated to South Africa within 30 days from the date of becoming entitled thereto.

 

[pensivemortal]

I think even the courts mentioned that our laws around this is overly complicated!
But thank you for all the input so far. I will indeed seek further professional advice but the information provided has been very helpful so far.