Catalyst Investment

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Offshore Investing and Its Benefits

Posted by on Jan 2, 2017

This can form a very important part of an investment strategy. It can also present opportunities free from the restrictions of local investment. This is none the less an area fraught with pitfalls. A consultation with a Partner at StoneHouse Capital could be of great help to an investor considering offshore investment. One simply needs to look at their Monthly Market and Economic Reports to see that in-depth coverage is given to global markets. There are also advisors and Certified Financial Planners (CFPs) who specialise in investment advice on foreign markets.

Offshore investment has become accessible to more investors. Major factors promoting access to foreign markets are developments in Internet based technology and global communications. Information on foreign markets is thus more freely available. This makes it a lot easier because information on investment risk is more accessible. The speed with which investors can react is thus improved. Thus people can feel more in control of their offshore investments.

What is Offshore Investment
The term €offshore investment€ simply refers to investment beyond the borders of an investor’s own country. The first implication is that it is free from local restrictions and conditions which limit the markets in an investor’s own country. This could mean exposure to markets which are not locally available. However, this does not mean that limitless opportunity suddenly opens up. Every country has a different set of restrictions and pitfalls.

Advantages of Offshore Investment
Portfolio Diversification
For this reason investors often consider it as an important aspect of portfolio diversification. Offshore investment accounts can give an investor virtually unlimited access to international markets, and to all major exchanges. New opportunities can also open up, for example developing countries which privatise their state owned industries.

Asset Protection
Offshore investment creates an opportunity to restructure ownership of assets. It provides a certain level of immunity against lawsuits, or lenders foreclosing on outstanding debts. This can be done through paper ownership transfers from individuals to corporations which are no longer susceptible to seizure.

According to the latest biannual Global Financial Centers Index, Bermuda remains in the top spot as the best place for offshore investing, one example of a company that offers offshore mutual funds in Bermuda is LOM

Tax Benefits
A general rule of thumb seems to be that one pays tax in a country in which one earns money. Some countries, like the USA, require that all income – local and foreign – be declared. It is also generally understood that one should not pay double tax on earnings. Currency earned on foreign shores has a beneficial impact on the economy of the investor’s home country, provided this is money which is brought into that country.

Some countries offer tax relief for foreign investors. They offer favourable tax rates in order to promote a healthy investment environment because it attracts outside wealth. Investment on behalf of a corporation can enjoy tax-exempt status. The USA is an example of this. However, it’s important to remain informed because legislative changes can create restrictive laws aimed at closing tax loopholes.

Many offshore jurisdictions constitute a certain level of secrecy. This means high profile investors can protect their wealth and interests by remaining anonymous. This anonymity also allows high profile investors to buy shares without smaller investors driving the prices up by following their example.

This does not mean that it is a license for criminals to operate freely. In most cases, like drug trafficking, money laundering or other illegal activities, offshore laws will allow for identity disclosure. Countries can have mutual agreements to facilitate this.