by Cecillia Albertyn
Cross border clarity and utilising the Isle of Man as a base for wealth expansion
The Isle of Man Indaba – comprising a diverse group of Isle of Man service providers from various sectors – recently convened an outstanding panel of experts who shared their insights on cross-border wealth management, and the advantages of utilising the Isle of Man as a jurisdiction.
Cross-border strategies can seem complex and daunting, but with the right structures, insights, and approaches, managing wealth across jurisdictions becomes an invaluable way to protect, grow, and transfer wealth, even in volatile markets. Now, more than ever, cross-border wealth management – for both businesses and individuals – needs to be grounded in clarity and careful planning.
The Isle of Man has strong historical ties to South Africa and the conversation focused on businesses and individuals operating in and wanting to best structure and utilise the opportunities within the African, UK and Isle of Man loop.
Even amidst increased trade protectionism, globalisation is not stopping, but is changing shape, becoming disrupted and more complex. The UK and South Africa have for long both benefitted from the sharing of skills and fostering of a relationship of mutual support and openness to trade. The question is how to build on the past and create new avenues for growth whilst navigating global complexities and headwinds.
Emerging from the conversation, there are 7 key considerations to provide stability and clarity in an unpredictable global landscape.
1. Structuring for Compliance: Navigating Evolving Tax Policies
One of the greatest risks facing international clients today is the rapid change in tax policies and regulatory requirements across multiple jurisdictions. As transparency initiatives like the Common Reporting Standard (CRS) increase the need for precise reporting between countries, any missteps can lead to significant penalties. Compliance must be the backbone of any cross-border wealth strategy.
South Africa has strict and far-reaching exchange control regulations and this must be factored in. The UK abolished the non-dom tax status in its autumn budget statement. These factors need to be considered in a holistic strategy.
Cutting corners doesn’t work and should not be seen as an ingredient to simplify structures. Adhering to management and control, and permanent establishment rules is crucial. People remain key to the operation of the structures.
2. Protecting Wealth through Jurisdictional Selection
Selecting the right jurisdiction is a critical component of cross-border wealth management. Jurisdictions like the Isle of Man offer secure, transparent regulatory environments that not only meet international standards but also provide solid frameworks for asset protection.
Isle of Man structures – such as trusts, foundations and corporate entities – offer a high degree of security and tax efficiency, particularly for clients in volatile regions. These structures provide robust protections against external risks like unpredictable political and economic instability, making the Isle of Man a reliable choice for clients looking to house their assets.
Jurisdictions should be selected based on holistic long-term strategy that takes multiple factors into account. Service providers and advisors who deeply understand their clients and are responsive to changing needs and circumstances are critical to the industry.
3. Cross-Border Estate Planning and Succession
For families with members in different countries, estate planning can become challenging due to varying inheritance laws, local tax policies, and even differing definitions of family relationships. A discretionary trust is often one of the most effective tools for cross-border estate planning, allowing flexibility, confidentiality, and asset protection.
Advisors need to think beyond their own speciality to deliver holistic solutions. It is imperative to find the right balance between onshore and offshore structures, each with its own purpose and benefits. Trusts established in stable jurisdictions like the Isle of Man provide a secure legal framework, which is particularly useful for South African clients with foreign investments. With experienced trustees in a trusted jurisdiction, these structures ensure that family wealth is preserved for future generations, even during uncertain times. Guard against too much complexity: Client feedback suggests keeping strategies as clear and focused as possible.
4. Managing Capital Flow and Currency Risks
For individuals and businesses navigating fluctuating exchange rates, careful management of capital flows is crucial. South African clients, for example, may wish to diversify holdings internationally to manage currency risk or hedge against economic volatility. Consider both capital and income-generating structures for a well-rounded strategy in this regard.
Jurisdictions like the Isle of Man provide flexible and stable banking infrastructure, allowing clients to strategically control currency exposure and manage foreign exchange risks. By partnering with local banks and financial institutions, clients can plan capital flow effectively, turning currency fluctuations into opportunities rather than liabilities. Considering bankability and banking options at an early stage should be strongly promoted and encouraged to emerging businesses and those looking to structure their wealth optimally.
5. Prioritising Privacy and Security
In an era where transparency is increasingly emphasised, privacy remains a critical concern. Privacy in wealth management means adopting legitimate structures and choosing jurisdictions that protect personal information without compromising compliance. There is a clear distinction between privacy and secrecy, which best practices and policies have built into regulations and guidance on the Isle of Man.
6. The Isle of Man is committed to sustainability as an integral part in shaping the future of the Island as a part of an interconnected and inter dependent world
ESG principles are not mere suggestions or optional practices. They are an essential element in business- & wealth succession and growth. Equally, the next generation of wealth creators and recipients of accumulated wealth value different investments as part of a diversified portfolio. Wealth managers and business service providers have to engage with this demographic and stay on trend to secure business- and wealth sustainability beyond the original settler. Sustainability, too, needs substance. With that in mind the Isle of Man has recently launched its Sustainability roadmap, laying out the way to build on and expand the island’s economic and ESG goals as a UNESCO Biosphere. Included in the plans are bio-diversity net gains – and carbon credits.
7. Trademarks, IP and digital assets
These are increasingly part of a bigger picture of growth, expansion and wealth succession. We are seeing a substantial flow world class technological innovations and IP coming out of South Africa. Exchange controls, IP valuation and Substance are critical considerations to build into an effective strategy. The Isle of Man is, for example, part of the UK trademark registry but the IP can be owned by an Isle of Man registered company. However, the substance and effective place of management must be the Isle of Man. Legal obligations to meet substance requirements are affected by numerous things, that require careful advice and guidance.
Decision making
Given the rapid shifts in global tax policies and regulatory environments, informed decision-making is crucial for anyone involved in cross-border wealth management. Technological innovations are accelerating economic development at unprecedented rates, especially on the African continent. It is also enabling efficiencies in transparency, compliance, accountability and enforcement of standards and regulation.
As a tax neutral jurisdiction, we challenge ourselves to keep in step with global shifts and evolving client needs. We are champions for tax morality and incentives that responsibly serve our clients but also our values that spur behaviour towards ESG principles. With increasing tax complexity, internationalisation, competition, and political volatility, tax certainty and clarity is more important than ever.
