Community post: Buying ETFs offshore

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ETFs offshoreThis post was submitted by a Fat Wallet listener on 4 December. The writer has granted Just One Lap permission to publish this email.


I had no problem opening a custody trading account with www.DeGiro.ie which has no platform fee and provides direct access to purchase almost anything you can imagine from a multitude of regions and exchanges.

The platform is a bit more complex than Easy Equities as you can buy individual shares, options, futures, cfd’s, warrants, bonds and whatever else. Trading fees depend on the exchange and product, but they offer a whole bunch of ETF products from various providers (DBX, IShares, Vanguard, etc..) on which there is zero transaction fees for one trade per month per ETF on the list. For example, I buy the (Irish Domiciled) Vanguard FTSE All-World UCITS ETF from Euronext Amsterdam at no transaction fees, but there are loads of options.

Anyone can open a DeGiro account, but you need to be able to fund it directly from your personal Euro or GBP bank account. You can’t use third party payment services for funding. Some of the ‘offshore’ bank accounts some South African banks offer aren’t accepted as they might be domiciled elsewhere or they don’t comply with anti-money laundering legislation.

You must first set up an offshore bank account before opening your trading account. You will also need a SARS tax number. DeGiro offers two different account profiles, Standard vs Custody. If you have a non-custody account, your assets are lent out to third parties. Another option for brokerage would be www.interactivebrokers.com, but there is a monthly platform fee unless your portfolio value exceeds US$100 000.

If you want to use DeGiro from South Africa there’s a fairly simple way to get a free Euro bank account from the German online provider N26.com, but you will need a street address in any of the supported regions as they mail you a debit card by post.

You can use a valid South African passport for activation and verification without any problem. Once it’s set up it’s simple and easy to use – and did I mention free 😉

Another bonus is that your N26 Mastercard allows five free ATM withdrawals per month in Europe and you can use it to make international payments online or pay merchants directly with no FX fee added. If you travel regularly the N26 Black account option provides free foreign currency ATM withdrawals at a flat monthly rate of EUR6.

Funding the foreign bank account is best done by avoiding the SWIFT options our banks offer. Fees are just too high and the rates are horrible. I prefer to use www.clickfx.co.za which usually works out best as long as you transfer amounts exceeding R100 000. Other options are Exchange4Free.co.za (flat 1% fee on amounts over R100 000)  and Sable International – but I haven’t used them myself.

I’m sure you would agree that one should only invest directly in foreign currency if you plan on spending foreign currency directly – else you need to account for the cost of converting the funds back to usable currency. However, there might be other benefits of direct investment in a foreign currency. In theory you could save on CGT due to the inflation differential as well as with the way SARS currently treats foreign dividends (as long as you’re not a top bracket income earner).

Apart from the investment angle, having a foreign bank account and trading account is a fun way to expand your scope and it just might open the door to some other opportunities as well!


Disclaimer: The views expressed in this article is not intended to serve as financial advice and do not represent the opinions of Just One Lap, its employees or affiliates. Please conduct your own research before signing up for any financial services.

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