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What is offshore investment?
Offshore investing refers to a variety of investment strategies that take advantage of tax benefits offered outside an investor’s home country.
There is no dearth of money-marketplace, bond and equity assets offered by trusted offshore investment companies that are financially sound, time-tested and, most importantly, legal.
What is offshore?
Offshore refers to the relocation by a unit of a business process from one country to another, usually of an operational process, such as manufacturing, or of ancillary processes. Even state governments make use of offshore investments. More recently, off-shoring has been primarily associated with the sourcing of technical and administrative services supporting domestic and global operations from outside the home country through internal (captive) or external (outsourcing) delivery models.
“Offshore” is usually used to depict a country where there are no taxes or low taxes for individual or commercial foreign individuals.
It is true that offshore investment havens have created a unique legally recognized and tax free environment for foreign individuals and businesses. They provide them exclusively. More than half of the world’s wealth is located in such asset havens.
Monetary secrecy, a stable legal environment and realistic judgments are the trademarks of these courts.
When we talk about offshore investment financial companies, the term tends to invoke the image of giant, shadowy monetary monoliths, investing funds without any transparency.
Benefit
There are several reasons why people prefer to invest offshore:
1. Tax reduction
Many countries recognized as tax havens offer tax incentives to foreign investors through offshore investments. Positive tax rates in an offshore investment potential country are intended to encourage a vigorous offshore investment climate that magnetizes outside funds. For small countries such as Mauritius and Seychelles, with only a few reserves and a small population, offshore deposits dramatically increased their economic activity.
Offshore investing occurs when offshore depositors form a company in a foreign country. The corporation acts as a shield for the investors’ financial credits, protecting them from the high tax burden that would accrue in their home nation.
Because the corporation does not engage in local operations, little or no taxes apply to the offshore investment company. Many foreign companies also enjoy tax-free status for investing in the US markets. As such, venturing through foreign corporations can yield a distinct advantage over investing as an individual.
2. Privacy
Many offshore investment jurisdictions have confidentiality laws that make it an illegal offense for any worker of the financial services commerce to disclose possession or other information about their clients or their dealings.
But in those instances where illegal action can be proved, identity is being disclosed. Thus Know Your Customer due diligence documents are becoming more complex.
Harm
The main drawbacks are cost as well as ease.
Many investors prefer to be able to meet and speak with the person setting up their incorporation of offshore investment companies and travel to the tax haven cost funds.
In many countries your sovereign income is taxed, so it is illegal not to disclose offshore investment returns. Offshore accounts are illegal for individuals in other countries, but authorization can be obtained from companies.
Many banks in offshore jurisdictions require investments of US$100,000 and above or smaller amounts to hold assets locally.
The types of offshore investment companies that commonly exist are:
- trust
- resident offshore company
- international trade company
- protected cell company
These types of companies also exist.
Example: Many mutual funds and hedge funds whose investors favor ‘offshore country’ ventures.
But even for average financiers like us, relatively small size offshore companies can be formed to meet our daily needs. Or we can invest in offshore companies in specialized funds through our offshore investment specialist.
Various uses are:
- trading companies
- professional service companies
- shipping companies
- investment companies
- Intellectual Property and Royalty Companies
- property owner companies
- asset protection companies
- holding companies
- dot com companies
- employment companies
trading companies
Import/export and general trading company activities are also well suited to the offshore investment company structure. The offshore investment company receives the order from the supplier and delivers the goods directly to the customer.
It invoices the customer and saves the difference in the tax free country. For example products from China to Kenya can be invoiced by Seychelles or RAK offshore incorporation and the revenue can be retained there.
Individuals use offshore investment companies to acquire mutual funds, stocks, property, bonds, jewelry, and precious metals. Sometimes they will also apply to these companies to trade in currency, equity and/or bonds. The wealthy would also have multiple offshore investment companies for different division of assets; For different countries or by different categories of investments.
Diversification avoids risk. But even in cases where capital gains are taxed, for example in property or equity, it is sometimes cheaper to sell a company rather than an individual asset.
professional service companies
Individuals, such as consultants, IT specialists, engineers, designers, writers and artists working outside their home country can benefit momentarily from using an offshore investment business. Offshore investment business impersonates the person as a company employee and receives fees for services rendered by the ’employee’ [possessor], This fee received and saved is tax free. The individual can then receive reimbursement as he or she hopes to reduce his or her taxes.
shipping companies
The use of offshore investment companies to own or license commercial vessels and pleasure craft is very familiar internationally. Shipping companies pool earnings in tax-free offshore jurisdictions and if each vessel is housed in a separate offshore investment company, this can achieve considerable asset protection by separating the liabilities of each individual craft.
investment companies
Individuals use offshore venture companies to purchase mutual funds, stocks, bonds, property, jewelry, and precious metals. Sometimes they will also use these companies to operate in currencies, equities and/or bonds through the Internet or through managed funds run by banks and financial institutions. The wealthy would also have diversified offshore investment companies for a disparate class of assets; For different countries or for different types of investments.
Diversification avoids danger. But even in cases where property is taxed, for example in goods or equity, it is sometimes economical to sell company rather than personal property.
Intellectual Property and Royalty Companies
Offshore investment companies are being viewed as owners of intellectual property and royalties received for software, technology rights, music, literature, patents, trademarks and copyrights, franchising and brands. These companies are in the form of Trust or Foundation.
property owner companies
Holding property in an offshore investment company saves you wealth gains taxes that are levied on the occasion of a property deal, which is avoided by selling the business rather than the property itself. Other important benefits are the authorized withholding of inheritance and other transfer taxes.
Mainly, in some countries, such as Islamic countries, succession is through Sharia law and not by your determination. An offshore holding will therefore ensure that assets outside the country do not need to be distributed in accordance with Sharia law.
asset protection companies
It is estimated that the U.S. A professional can be prosecuted every 3 years! and that more than 90% of the world’s lawsuits are filed in the US.
Amazing stats!
If your income or assets exceed US$100,000, you should seriously consider offshore investment companies!
Most offshore jurisdictions require that for a lawsuit, an attorney must be hired and paid before a lawsuit can be filed, thus keeping frivolous lawsuits away. A substantial bank bond is often placed by the government to enforce a lawsuit. Even going to court in some offshore investment jurisdictions (the wait can take years).
If you have substantial liquid assets you should consider a trust that will own the offshore company. It will provide maximum protection at minimum cost.
However, we must remember that this structure is for asset protection, not tax savings and hence the focus must be maintained.
holding companies
Offshore investment companies can also be used to own and fund companies operating in different countries. They can also be joint venture partners or ‘promoters’ of publicly quoted companies. Mauritius is suitable as a country for investment companies because of its favorable double tax treaties.
dot com companies
The Internet has greatly reduced the cost of entry into business and as a result has made legal protection of both physical and intellectual assets of a company much easier. Dot com companies now use this flexibility to invite different investors to develop different software projects in different offshore investment companies and keep the flexibility to raise different funds for different projects depending on the success of the project Does Mauritius and Seychelles both have a Protected Sale Company [PCC] Structures available for such need.
Then there is the possibility of receiving the money you earn on the web into the bank account of the offshore company. Would it be in your best interest?
employment companies
Multinational companies use offshore investment companies to employ expatriate employees who are stationed in various tax jurisdictions around the world. Employing an offshore company is preferred to facilitate relocation, reduce employee taxes and easily administer benefits. Working on assignments around the world.
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