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Offshore investments – advantages and limitations

Offshore investments – advantages and limitations

Nowadays there are different attitudes towards offshore investing. The situation has worsened after the case of the so-called Panama Papers. The leaked documents on numerous shell companies have created an impression that all the offshore company investors are looking for obscure places to stash their illegal funds.

However, in most cases, offshore investing is completely legal and carried by law-abiding citizens. Moreover, in spite of all the attempts of certain governments wanting to bring all money flows under control, offshore investing progress in its popularity due to its favourable conditions.

What are offshore investments?

In our overview, we will try to weigh all pros and cons of offshore investing. But, first of all, we should define the term of “offshore investing” itself. So, what is offshore investing?

Offshore investing is placing money outside the country of permanent residence with the purpose of capitalizing on more favourable financial conditions.

It means that, practically, any investment outside of your county may be classified as offshore. However, in our present review, we would concentrate only on the investments and corporate solutions which, apart from the investment interest as such, provide tax advantages.

Advantages of offshore investing

Tax Reduction

The possibility to decrease tax burden using various tax incentives is designed to attract high-net-worth individuals from outside countries.

On the other side, the governments of the countries with less attractive tax regimes are not interested in losing tax revenues and therefore create more stringent tax regulations. On this account, revenue authorities and tax inspectors have become more attentive to the revenues earned using offshore investing.

Protection of assets

Offshore jurisdictions are frequently used to restructure ownership of assets Transferring ownership rights from natural persons to legal entities is possible over trusts or other companies.

Such change of ownership relieves individuals from the risk to lose money due to the errors of creditors, legal liability, seizure or other troubles.

Additional Confidentiality

Usually, offshore jurisdictions offer confidentiality provisions backed by strict corporate and banking confidentiality laws.

At the same time, such countries certainly do not allow criminals to hide their funds. In fact, any offshore jurisdiction will disclose person’s identity in the case of availability of incontrovertible proofs of such illegal activities as money laundering, drug trafficking, etc.

Good possibility for Investments Diversification

International investment opportunities are restricted in many countries due to the stringent regulations. It is considered an obstacle for wide-ranging investment diversification. Offshore investments, on the contrary, provide unlimited access to both international markets and major international exchanges.

Developing countries, in their turn, also get more opportunities when carrying out offshore investments. It is especially true for those starting privatization of government sectors.

Potential Disadvantages

Tax Laws Tightening

Nowadays, some tax agencies have to tighten up the applied efficiency-enhancing regulations due to the continuous political pressure from outside.

Accessibility of offshore investments

Another disadvantage is that your investment is outside of your country means it may require more control which may be a bit harder to implement over a distance. However, with the today’s technologies and fast communication, this becomes a very insignificant issue.

Expenses and Costs

Setting up an offshore account requires some certain financial expenses. Such costs are for a company registration as well as yearly – for its renewal.

Besides, it should be noted that you may be required to visit a country personally when opening an account, managing it or making investments. However, such costs are usually covered by the revenues from foreign investments.

Is offshore investing safe?

Numerous international companies have opted for keeping significant amounts of money in popular offshores. In fact, more than half of the world’s assets are held in offshore jurisdictions. Such offshore countries are safe for making offshore investments.

However, it is advisable to check varies offshore options before making investments to prevent possible troubles. You should make a right choice of an offshore company suitable for your needs and requirements.

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