Offshore investing sometimes connotes shady deals where people put their money outside of the country to keep it out of the government. This notion, however, is far from the truth. Yes, there may be some cases about this but most of these investments are actual legal and honest-to-goodness transactions.
Gone are the days when "savings" mean keeping your money under the mattress. In today's complex and highly developed financial world, there are plenty of choices as to where you can place your money. The main question then becomes, "What's the best place to put my money, where it can be safe but still provide reasonably attractive returns?" One popular option would be offshore investments. This, in a nutshell, means putting your money in a jurisdiction of a country other than where you live. Hence, the name, "offshore", as opposed to "onshore" investments - where you invest money in the country of your residence.
Here are some of the reasons why offshore investments are attractive to those who have money to invest:
Tax breaks and tax shields Some countries encourage the entry of foreign investments by being tax havens. These aim to draw in investors in order to stimulate their country's economic activity. Of course, the savings incurred by these tax breaks (some countries even give tax-exempt status) is highly attractive when compared to taxes levied on inshore investments.
Asset protection Worried about lawsuits and foreclosures due to outstanding debts? Some, in a bid to protect their assets turn to offshore investment funds so that they are no longer vulnerable to these risks. They do this by putting up foundations, trusts or corporations so that their funds and properties can be transferred to other legal entities.
Fewer financial regulations There are some regulations that restrict the diversification of your investments. So investing outside of the country provides you with more options.
Confidentiality Not only are the assets protected from seizure. Offshore, there are stringent laws preventing the disclosure of key information. So an investor's identity, their shareholdings in a company and investment details are kept confidential. Please take note though that in cases where there is a clear case of money laundering, drug trafficking or anything illegal, the law also allows investment groups to disclose client information.
However, you should also be aware that offshore investing has its disadvantages. The IRS and other government agencies are actually looking closely as to how they can get rid of the tax loopholes. Also, setting up an account could be quite expensive. You will need to set up a corporation, which means fees for corporate registration, legal requirements and so on. Also, you will need a lot of money (from $100,000 to $1 million as the minimum).
It is up to you to weigh the benefits and risks of participating in an offshore investment account. Do extensive research before you let go of your money.