Is offshore investing only for the rich and famous? Probably not, although most of us don’t know a lot about offshore investing. Here is a simple primer for the fledgling offshore investor.
Offshore investing is simply placing your investment dollars in an account with a bank that is not in the United States. There are several advantages to investing offshore.
First, there is less regulation. Some may feel that this makes the investment riskier, but that is not necessarily the case. It does allow the fund manager or company to act more freely. The lack of regulation also means less taxes. Most offshore accounts are invested in countries that have minimal tax laws for these investments. That means that more of your money is available to work for you.
Privacy is also an issue for some investors. Most of the countries typically involved in offshore investments have laws making it illegal for the investment firms to release any information regarding their investors. There is virtually no governmental reporting. This ensures that your investments and personal information will be confidential. For many who want privacy, this is a major benefit of offshore accounts.
In our lawsuit happy society, those with assets want to protect them from litigation. Many of the offshore countries chosen have laws that don’t recognize foreign awards so the assets placed in these countries are not subject to seizure. Although not a major consideration for everyone, for many it is a factor in deciding to choose an offshore investment vehicle.
Many of the offshore jurisdiction have much less complicated estate laws and tax structures. Utilizing offshore accounts for estate planning purposes is becoming more and more popular. Many set up an offshore charitable foundation in countries with favorable estate tax laws.
In order to set up an offshore investment account, an individual must either reside in or establish a legal presence in the offshore country that will make the gains taxable in that jurisdiction and not the onshore one. There are several companies that will help you set up a corporation and complete the required paperwork to get started in offshore investing. These firms will help you set up a corporation called an International Business Corporation (IBC) or a Limited Liability Corporation (LLC).
If you’re happy with your existing portfolio, but you want to move it offshore, you can move to a brokerage firm offshore once the legal paperwork is completed. The brokerage account will be opened under the name of the IBC, and then the brokerage completes your orders in the name of the IBC. Your personal identity is never involved. Of course, these brokerages can invest in offshore mutual funds or any investment worldwide.
Offshore investing may not be for everyone, but if you have assets that you want to protect from seizure, you want to maintain the strictest confidentiality, or you want to seek tax relief, investigate the possibilities. You may find that offshore investing will help you reach your financial goals.