Did you know?
Offshore is now an important part of the international financial system. Experts believe that as much as half the world''''s capital flows through offshore financial centers. Offshore jurisdictions have only 1.2% of the world''''s population and yet they hold 26% of the world''''s wealth, including 31% of the net profits of United States multinationals. According to Merrill Lynch and Gemini Consulting''''s "World Wealth Report" one third of the wealth of the world''''s "high net-worth individuals"-nearly $6 trillion out of $17.5 trillion-may now be held offshore.
Source: Wikipedia - Statistics concerning offshore banking September 2008
What is offshore? Going offshore in simple terms means placing your savings, investments, assets or business concerns outside of your home country. Usually within one of the many offshore financial centers, which are sometimes referred to as tax havens. An offshore financial center (tax haven) is a country or region that has very favourable tax advantages, which means that your savings, investments, assets or business profits can grow free of almost any taxation. However, taxation is only one reason why many decide to go offshore.
Individuals and businesses usually "go offshore" for one or more of the following reasons:
- Tax Efficiency
- Asset Protection
- Regulatory Advantages
To protect the free flow of your personal information and dealings. An offshore entity has no obligation to release your personal or business information, affording you with a great deal of privacy & confidentiality.
In general terms your personal information will not be divulged to any governing body or tax authority unless suitable evidence can be shown to prove that you have been involved in criminal activities, such as money laundering or drug trafficking.
Financial privacy is becoming a thing of the past. Almost every single transaction made at a bank or ATM, by law, must be recorded and filed. Consumer credit agencies maintain databases full of sensitive information that is used and shared by other organizations and agencies. Asset collectors routinely advertise their ability to locate bank accounts, brokerage accounts, and real estate and business holdings. Should asset collectors find substantial wealth, the individual or corporation becomes an easy target for a lawsuit.
Unless ethical and legal steps are taken to insure privacy, sensitive and confidential information could easily get into the wrong hands. Placing your assets, investments, savings bank and brokerage accounts offshore will keep them off the asset collector''''s radar screen. Consumer credit agencies and government departments do not have access to foreign account records or transactions. Domestic property may be held in the name of a foreign corporation (IBC) or trust. This insures that asset collectors and agencies cannot locate it. By taking advantage of these methods an individual or corporation becomes a smaller target and the likelihood of being sued is reduced. Utilizing offshore tools to protect privacy could mean the difference between keeping and losing what is rightfully yours.
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As stated above, your savings, investments, assets or business profits can grow almost free of any form of taxation. This does not mean tax avoidance, it simply means whilst your assets are held offshore they will benefit from very favourable tax advantages. There will for many however, be a potential tax liability when you look to repatriate your assets to your home country. This will depend on your nationality and your country of residence at the time of repatriation.
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There are many methods in which to protect your assets using an offshore structure, in the form of an investment product, an IBC (International Business Company) or a offshore trust, or even a simple offshore bank account.
These will protect your assets from:
- Protection from invasive bureaucracy
- Protection against lawsuits
- Protect your assets from seizure
The simplest form of protection offshore is the nature of the offshore privacy rules. What isn''''t known can''''t be attacked. The basic form of offshore privacy combined with an IBC or Trust is a very secure method to legally protect your assets from prying eyes.
Lawsuits are filed every week. Ex-spouses, ex-business partners, disgruntled employees or predatory lawyers may file a suit if they believe a potential defendant is an attractive target. Losing such a lawsuit could cause a lifetime''''s worth of savings, investments and real estate holdings to be lost. In light of this, placing assets offshore is a wise and effective means of protection from frivolous lawsuits.
Once your assets are held offshore they may become unreachable by domestic courts. In the event of a lawsuit, a defendant may be forced to forfeit domestic assets, but offshore assets could remain untouched. Offshore courts do not recognize or carry out domestic judgments. This insures that assets sent offshore should remain confidential, secure, and permanently in the hands of their rightful owners.
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The regulations in force within most high tax countries, are there to protect investors, and rightly so. However, due to the very strict nature of these regulations, fund managers feel as if they are wearing a financial straight Jacket. It is difficult for them to compete with the returns of their offshore-based partners who enjoy less restrictive regulation. Many offshore jurisdictions have very mature regulatory systems in place, often based on those present within the US or the UK, yet they allow fund managers great freedom to add value for their investors. This is why offshore funds nearly always outperform their onshore equivalents.
Within the high regulation onshore countries, excessive rules and bureaucracy often plague domestic businesses and operations. Valuable resources are diverted away from the productive process in order to monitor compliance as a result of the restrictions imposed. Curing this problem is as simple as moving to friendlier shores. Offshore jurisdictions are intentionally business-friendly and have regulations that are straightforward, simple to understand and inexpensive to comply with. Moving a business offshore and enjoying a more pleasant business climate may require nothing more than forming an offshore corporation and transferring assets from the domestic corporation to the foreign one.
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Is all of this legal?
Do you trust your current bank or investment provider?
Chances are that they too have an offshore operation; most of the world major banks and investment companies have an offshore present.
Companies such as Goldman Sachs, JP Morgan, HSBC, UBS, Barclays, Deustche all have offshore operations or subsidiaries. It is not the offshore industry itself that is illegal; it is only the devious activities of certain individuals who may give the offshore industry a poor reputation. It is also true that the due diligence, and anti-money laundering checks performed by offshore companies is increasing, especially following the 9/11 terrorist attacks. Which will ensure that it becomes difficult for criminals to abuse and tarnish the image of the offshore industry.
In fact the offshore industry is probably one of the fastest growing sectors within the financial services industry. Many of the worlds most talented fund managers and analysts are leaving their well paid positions as onshore fund managers, to set up their own offshore funds, due to the greater flexibility and choice they can offer to their clients.
As a result of all of this, the offshore market place is no longer the exclusive territory of the rich and famous. Nowadays due to the reduced costs and entry levels, almost anyone can own an offshore fund, investment, bank account or company.
Most people are still unaware of the opportunities open to them within the offshore marketplace, which is mainly due to the lack of and fragmented information available.
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