What Is Offshore | Save More With US$ 100,000+
What is offshore: What is offshore, where and how to grow your assets optimally via offshore entities
What is offshore?
What is offshore: Simply put, any country other than the one where you live could be considered “offshore”. Providing you are from outside the jurisdiction that you choose, both as a citizen or a resident, you can obtain some special financial or asset protection considerations.
If you live in the US, other countries are offshore. If you live in the UK, other countries and the US are offshore. More often than not, however, “offshore” is used to describe a nation where there are either no taxes or low taxes for foreigners either personal or corporate.
For anyone except Americans, the US can be an offshore haven of value. Banking, investment (trading/brokerage accounts) and financial activity are included in this. This includes real estate ownership, stocks and securities, and bonds.
True, offshore havens have created a unique legal and tax climate for foreign individuals and businesses. They cater specifically to them. More than half the world’s wealth resides in such asset havens.
Financial privacy, a stable legal climate, and realistic regulations are the hallmarks of these jurisdictions.
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What is offshore: Grow your assets
The term offshore financial companies, conjures up an image of huge, shadowy, financial monoliths, investing funds without any transparency.
These types of companies also exist. e.g. many mutual funds and hedge funds whose investors prefer ‘offshore country’ investments.
But ordinary investors like you too can form offshore companies of relatively smaller size to fulfill your more mundane everyday needs. Or you can invest, via your offshore company to own investments in special funds.
If you have an income or assets of more than US$ 100,000, you should seriously consider offshore investing companies.
Most offshore jurisdictions require that for a lawsuit, a lawyer must be hired and paid up front before a suit can be filed, thus keeping frivolous lawsuits away.
Often a substantial bank bond has to be placed with the government, to even implement a lawsuit. It can also take years of waiting to get into court in some offshore jurisdictions.
What is offshore: Type of entities
The types of offshore investing entities usually are:
- International Business Company
- Resident Offshore Company
- Protected Cell Company [PCC]
If you have substantial liquid assets you should consider a Trust which would own the offshore company. This will provide a greater degree of protection, at the least expense.
However, you should remember that this structure is for asset protection, not necessarily for tax savings and so you may want to maintain that focus to allow you more flexibility of jurisdiction.
While there will always be instances of shady offshore or even onshore deals, the vast majority of offshore investing companies are perfectly legal. In fact, depending on your situation, offshore investment companies may offer you many advantages.
What is offshore: Offshore investing advantages
Offshore investing refers to a wide range of investment strategies that capitalize on advantages offered outside of an investor’s home country.
There is no shortage of money-market, bond and equity assets offered by reputable offshore companies that are fiscally sound, time-tested and, most importantly, legal.
1. Tax Reduction
Many countries, known as tax havens, offer tax incentives to foreign investors. The favorable tax rates in an offshore country are designed to promote a healthy investment environment that attracts outside wealth. For tiny countries e.g. Mauritius and Seychelles, with very few resources and a small population, offshore investors dramatically increase their economic activity.
Simply put, offshore investment occurs when offshore investors form a corporation in a foreign country. The corporation acts as a shell for the investors’ accounts, shielding them from the higher tax burden that would be incurred in their home country.
Because the corporation does not engage in local operations, little or no tax is imposed on the offshore corporation. Many foreign companies also enjoy tax-exempt status when they invest in U.S. markets. As such, making investments through foreign corporations can hold a distinct advantage over making investments as an individual.
In recent years, however, the U.S. government has become increasingly aware of the tax revenue lost to offshore investing companies and has created more defined and restrictive laws that close tax loopholes. Investment revenue earned through offshore investment is now a focus of regulators and the tax man alike.
Many offshore jurisdictions have secrecy legislation which makes it a criminal offense for any employee of the financial services industry to disclose ownership or other information about their clients or their businesses.
But in instances where criminal proceedings can be proved, identities are being disclosed. Thus the Know Your Client due diligence documents are becoming more complex.
What is offshore: Offshore investing disadvantages
The major disadvantages are those of costs and convenience.
Many investors like to be able to meet and talk to the person setting up their offshore investing companies and traveling to the tax haven costs money.
In some countries you are taxed on your global income, so not disclosing offshore income is illegal. In other countries having offshore accounts is illegal for individuals but permissions can be obtained for companies.
Some banks in offshore jurisdictions require minimum investments of US$ 100,000 and higher.
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