In recent years, however, the U.S. government has
become increasingly aware of the tax revenue lost to
offshore investing, 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.
Asset Protection - Offshore centers are popular
locations for restructuring ownership of assets.
Through trusts, foundations or through an existing
corporation individual wealth ownership can be
transferred from people to other legal entities. Many
individuals who are concerned about lawsuits, or
lenders foreclosing on outstanding debts elect to
transfer a portion of their assets from their personal
estates to an entity that holds it outside of their
home country. By making these on-paper ownership
transfers, individuals are no longer susceptible to
seizure or other domestic troubles.
Confidentiality - Many offshore jurisdictions offer
the complimentary benefit of secrecy legislation.
These countries have enacted laws establishing
strict corporate and banking confidentiality. If
this confidentiality is breached, there are serious
consequences for the offending party. An example
of a breach of banking confidentiality is divulging
customer identities; disclosing shareholders is
a breach of corporate confidentiality in some
jurisdictions. From the point of view of a highprofile investor, however, keeping information, such
as the investor’s identity, secret while accumulating
shares of a public company can offer that investor a
significant financial (and legal) advantage.
Diversification of Investment - In some countries,
regulations restrict the international investment
opportunities of citizens. Many investors feel that
such restriction hinders the establishment of a
truly diversified investment portfolio. Offshore
accounts are much more flexible, giving investors
unlimited access to international markets and to
all major exchanges. On top of that, there are many
opportunities in developing nations, especially in
those that are beginning to privatize sectors that
were formerly under government control. China’s
willingness to privatize some industries has investors
drooling over the world’s largest consumer market.
avoidance. There are still loopholes, but most are
shrinking more and more every year. In 2004, the
IRS amended the Internal Revenue Code (IRC)
and began to collect taxes from both American
corporations that operate out of another country and
American citizens and residents who earn money
through offshore investments.
Cost - Offshore Accounts are not cheap to set
up. Depending on the individual’s investment goals
and the jurisdiction he or she chooses, an offshore
corporation may need to be started. Setting up an
offshore corporation may mean steep legal fees,
corporate or account registration fees and in some
cases investors are even required to own property
(a residence) in the country in which they have an
offshore account or operate a holding company.
Furthermore many offshore accounts require
minimum investments of between $100,000 and
$1 million. Businesses that make money facilitating
offshore investment know that their offerings are in
high demand by the very wealthy and they charge
accordingly.
How Safe Is Offshore Investing?
Popular offshore countries such as the Bahamas,
Bermuda, Cayman Islands and Isle of Man are
known to offer fairly secure investment opportunities.
More than half of the world’s assets and investments
are held in offshore jurisdictions and many wellrecognized companies have investment opportunities
in offshore locales. Still, like every investment you
make, use common sense and choose a reputable
investment firm. It is also a good idea to consult
with an experienced and reputable investment
advisor, accountant, and lawyer who specializes in
international investment. If you are looking to protect
your assets, or are concerned with estate planning or
business succession, it would be prudent to find an
attorney (or a team of attorneys) specializing in asset
protection, wills or business succession. Of course,
these professionals come at a cost. In most cases the
benefits of offshore investing are outweighed by the
tremendous costs of professional fees, commissions,
travel expenses and downside risk.
Disadvantages
Tax Laws are Tightening - Tax agencies like the
IRS aren’t ignorant of offshore strategies. They’ve
clamped down on some traditional ways of tax
www.reimag.co.za
RESOURCES
Investopedia.com
Offshore Handbook 2016
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