Offshore investment – the perfect way to save your wealth
What is an offshore investment?
Offshore investing refers to a wide variety of investment strategies that take advantage of tax benefits offered outside of the investor’s home country.
There is no shortage of money markets, bonds and equity assets offered by reliable offshore investment companies that are fiscally sound, time-tested and, most importantly, legal.
What is offshore?
Offshoring explains the repositioning by an entity of a commercial process from one province to another, usually an operational process such as manufacturing or support processes. Even state governments are using offshore investment. More recently, offshoring has primarily been associated with the provision of technical and administrative services supporting domestic and global operations outside the home country, through captive or outsourced delivery models.
“Offshore” generally means a country that also has no taxes or low taxes for non-residents, individuals or businesses.
It is true that offshore investment havens have created a unique legally recognized and tax-free climate for foreign individuals and companies. They offer specially for them. More than half of the world’s assets exist in such asset havens.
Monetary privacy, a stable legal environment and realistic solutions are the hallmarks of these jurisdictions.
When we talk about offshore investment finance companies, the term conjures up an image of huge, shadowy money monoliths investing funds without any transparency.
There are many reasons why people like offshore investments:
1. Tax relief
Many countries recognized as tax havens offer tax breaks to foreign investors through offshore investments. Positive tax rates in a country with potential offshore investment are intended to foster a vibrant offshore investment climate that magnetizes foreign wealth. For small countries like Mauritius and Seychelles, with only a few reserves and a small population, offshore investors have dramatically increased their economic activity.
Offshore investments occur when offshore investors outline a company in an overseas country. The corporation acts as a shield for investors’ financial credits, protecting them from the higher tax burden that would be acquired in their home nation.
Because the corporation does not engage in domestic operations, little or no tax is imposed on the offshore investment company. Many overseas companies also take advantage of the tax-exempt category when launching in the US markets. As such, doing ventures through foreign corporations can benefit significantly from making investments as an individual.
Many offshore investment jurisdictions have privacy legislation that makes it an illegal offense for any employee in the financial services trade to disclose ownership or other information about their clients or their transactions.
But in instances where illegal proceedings can be proven, identities are revealed. This makes Know Your Client due diligence documents even more complex.
The main disadvantages are those of cost, along with ease.
Many investors want to have the opportunity to meet and talk with the person who sets up offshore investment companies and the trip to the tax haven costs money.
In a number of nations, you are taxed on your universal income, so not disclosing returns from offshore investments is illegal. In other countries, holding offshore accounts is illegal for individuals, but permits can be obtained by companies.
Several banks in offshore jurisdictions require a minimum investment amount of US$100,000 and above or to hold assets locally.
Commonly existing types of offshore investment companies are:
- Resident offshore company
- International business company
- Protected Cell Company
Such companies also exist.
Eg: Many mutual funds and hedge funds whose investors favor ventures in “offshore countries”.
But average financiers like us can also set up offshore companies of a relatively small size to meet our most everyday needs. Or we can bring, through our offshore investment expert, into offshore companies to own investments in special funds.
It has different applications:
- Commercial companies
- Professional service firms
- Transport companies
- Investment companies
- Intellectual property and copyright companies
- Companies owning properties
- Asset protection firms
- Holding companies
- Dot Com Companies
- Employment companies
Import/export and general trading company activities are also compatible with the offshore investment company structure. The offshore investment company receives orders from the supplier and distributes the goods directly to the customer.
It invoices the customer and saves the difference in a tax-free country. For example, products from China to Kenya can be invoiced by an offshore corporation in the Seychelles, or RAK, and the proceeds retained there.
Individuals use offshore investment companies to acquire mutual funds, stocks, real estate, bonds, jewelry and precious metals. Sometimes they will apply these companies to trade currency, stocks and/or bonds as well. The rich will also have diversified offshore investment companies for different ownership splits; for different countries or by different categories of investments.
Diversification avoids risk. But also in cases where capital gains taxes are imposed, for example on property or equity, it is sometimes cheaper to sell the company than the individual asset itself.
Professional service firms
Individuals such as consultants, IT experts, engineers, designers, writers and contractors working outside their home country can profit instantly from using an offshore investment business. The offshore investment business presents the person as an employee of the company and receives a fee for the services provided by the “employee” [possessor]. This fee is earned and saved tax-free. The person can then receive the benefit as he or she hopes to minimize his or her taxes.
The use of offshore investment companies to own or license commercial and pleasure craft is well known internationally. Shipping companies accumulate profits in tax-free offshore jurisdictions, and if each ship is placed in a separate offshore investment company, it can obtain significant asset security by isolating the liabilities of each individual ship.
Individuals use offshore venture companies to buy mutual funds, stocks, bonds, real estate, jewelry and precious metals. Sometimes they will also use these companies to deal with currencies, stocks and/or bonds either through the internet or through managed funds managed by banks and financial institutions. The wealthy will also have diversified offshore investment companies for different asset classes; for different countries or through different types of investments.
Diversification avoids the threat. But also in cases where taxes are imposed on gains on assets, such as goods or capital, it is sometimes economical to sell the company rather than the individual asset itself.
Intellectual property and copyright companies
Offshore investment companies are seen as vehicles for holding intellectual property and royalties received for software, technology rights, music, literature, patents, trademarks and copyrights, franchises and brands. These companies are of the type of trusts or foundations.
Companies owning properties
Owning property in an offshore investment company saves you capital gains taxes that may be levied on the property transaction, which are avoided by selling the business instead of the property. Other significant advantages are the permitted avoidance of inheritance and other transfer taxes.
Mainly in some countries, for example Islamic, inheritance is through Sharia regulations and not by your choice. So offshore ownership will ensure that assets held outside the country do not need to be distributed according to Sharia law.
Asset protection firms
It has been estimated that a professional in the US can be expected to be sued every 3 years! And that more than 90% of the world’s lawsuits are filed in the US.
If you have income or assets over $100,000, you should seriously consider offshore investment companies!
Most offshore jurisdictions require a lawsuit attorney to be hired and paid in advance before a lawsuit can be filed, thus preventing frivolous lawsuits. Often a substantial bank bond must be posted by the government even to file a lawsuit. You may also (take years to wait) get to court in some offshore investment jurisdictions.
If you have significant liquid assets, you should consider a trust to hold the offshore company. This will provide a higher degree of protection at the least cost.
However, we must remember that this structure is for asset protection, not tax savings, so the focus must be maintained.
Offshore investment companies can also be used to own and finance companies operating in different countries. They may also be partners in joint ventures or ‘promoters’ of publicly listed companies. Mauritius is well suited as a country for company investment due to its favorable double taxation treaties.
Dot Com Companies
The Internet has made the cost of starting a business very low and therefore the legal protection of a company’s assets, both physical and intellectual, much easier. Dot Com companies now use this flexibility to develop different software projects in different offshore investment companies to invite different investors and keep the flexibility of raising funds separately for different projects depending on the success of the project. Both Mauritius and Seychelles have a Protected Cell Company [PCC] structures available for just this kind of need.
Then there is an option to receive your funds earned on the web into an offshore company bank account. Would this be of interest to you?
Multinational companies use offshore investment companies to hire foreign staff who are located in different tax jurisdictions around the world. To facilitate transfers, reduce the employee’s taxes and easily administer benefits, offshore company employment is preferred. Work on assignments around the world.
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