Offshore Investing

Offshore investment is the keeping of money in a jurisdiction other than one's country of residence. Offshore jurisdictions are a commonly accepted solution to reducing excessive tax burdens levied in most countries to both large and small scale investors alike.

Selected offshore locations may be seen by some as havens for protecting illegal or gray market money from the law back in the investor's country while allowing the investor to use offshore investing as a way to grow that money tax free and free from reporting requirements

While this is sometimes the case, many large legitmate investors also take advantage of higher rates of return or lower rates of tax on that return offered by operating via such domiciles. The advantage to this is that such operations are both legal and less costly than the solutions offered in the investor's country - or "onshore". Locations favored for investment due to low tax rates are known as offshore financial centres or tax havens.

Offshore solutions are accessible to anyone who can meet the minimum investment amount or pay the obligatory fees required to open such an entity.

Tax is the driving force behind 'offshore' activity. Due to offshore solutions investors are able to conduct investment activities in a profitable fashion. Often, taxes levied by an investor's home country are critical to the profitablitiy of any given investment. Using offshore domiciled special purpose vehicles an investor may reduce this burden allowing the investor to achieve greater profitability overall.

Another reason why 'offshore' investment is superior to 'onshore' investment is because it is less regulated, and the behavior of the offshore investment provider, whether he be a banker, fund manager, trustee or stock-broker, is freer than it could be in a more regulated environment.

Reasons for offshore investment:

Avoidance of forced heirship
Asset protection
Less regulation.
Bank Privacy
Legal Tax Advantages
Illegal Tax Evasion, to include money laundering

Arguments against Offshore Investment:

Wealth earned in one country is taken out and not recirculated
Encourages unhealthy tax competition between tax jurisdictions and brings down wages for labour everywhere
Encourages abuse and lack of financial transparency