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What Questions Should One Ask before Offshore Investing?

Jul 22, 2008
Many individuals in some countries choose to reap the financial benefits of emerging or strong economies by investing offshore. This means that a person can live in the United States or Canada and invest in stock over in India or in China. Some individuals may even choose to invest in real estate that is available in another country. They do this because it has been found that offshore investing can be quite profitable, especially if the economy of that country is one that is growing.

Why offshore investing?

There are many countries that are known as "tax havens." These are the countries that offer tax incentives to anyone of a foreign country who has decided to invest in them. This is done to attract the wealth of other countries. Ever wondered how some small countries with small populations and limited resources are not poor? That is why. They attract these investors with tax incentives that can make money for both the country and the investor.

But there is a catch to this. The United States is able to tax on worldwide income. Anyone using offshore investing to evade their taxes will be prosecuted, but there may still be incentives available.

This brings us to question 1:

- Which countries are going to offer me the best incentives?

Another thing to be considered is asset protection. Many turn to offshore investing to protect their assets. People who are worried about losing assets through such actions as lawsuits may choose to invest some of their assets in another country. This keeps them from losing everything. This is also where a tax exception for U.S. residents comes in. If the U.S. resident is a trustor, then they can make tax-free contributions to their offshore trust.

This brings us to question 2:

- Which countries are going to offer me the best asset protection?

The last thing that many look for in offshore investing is confidentiality. Many countries cannot disclose who their shareholders are. If they do, they have to face serious consequences. The only time that this can legally be breached is if there is any drug trafficking or money laundering going on.

However, an individual isn't a criminal if he or she needs this confidentiality. There are some high profile investors who don't want everyone knowing which stocks are making them a ton of money. They don't want the growth pattern to be disrupted by a bunch of smaller investors.
This brings us to question 3:

- Which countries have the best laws regarding confidentiality?

Other things to consider

There are plenty of other things to consider such as the fact that diversification is crucial in investing. Offshore investing opportunities allow for this diversification. Investors can access all major exchanges, allowing them to have an excellent portfolio.

Other questions to ask:

- How will the tax laws affect me? The truth to this question is that the IRS has clamped down. There are still some existing loopholes that allow a person to avoid taxes, but there are few.

- How much will it cost to open an offshore investment account? Let's face it; these are not cheap accounts to open.

- What is the minimum investment? Some countries require a minimum investment of $100,000.

- How safe is it to invest offshore? There are certain countries such as the Cayman Islands, Bermuda, and the Bahamas that are known for very safe investments.

Just keep in mind that over half of the world's investment accounts are held offshore. That is what keeps a lot of the world's economies going. So if you decide this is a route you want to take, ask yourself the above questions and do your research to find the best investment opportunity for you.
About the Author
Offshore investment company offers private, tax-efficient multi-currency offshore accounts and offshore mutual funds to serve your investment needs.
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