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So you have decided that offshore is the way forward.
The three most pressing concerns, then, are what
type of investment you feel is right for you,
where you choose to invest or bank, and how involved
you are prepared to be in offshore life.
The
range of offshore investment and banking options
available to today's expatriate can sometimes
seem a little bewildering to those not well-versed
in finance, so before we deal with the choice
of jurisdiction, here is a brief rundown of your
options, and the advantages and disadvantages
of each for an expatriate.
Offshore
banking is worth considering whatever the length
of your expatriation or future plans, as you can
ensure that interest is paid out or added to the
balance gross, and your balance and transaction
details will be subject to greater confidentiality
and protection. Even if you still have currency
commitments at home (for example mortgage payments),
there may be no need to maintain your account
there to deal with these expenses, as most offshore
banks are well equipped to deal with every aspect
of expatriate money management, including remittances
to your home country.
It
is, however, worthwhile bearing in mind the charges
levied for different facilities, for example credit
and debit cards, cheque books and electronic transfers.
By the very nature of offshore, these all involve
your money being transferred across the globe,
and how much this costs varies widely from bank
to bank. So think carefully about what you want
to be able to do with your money, and if you decide
that you really need extra facilities, check who
offers them at the most reasonable price, and
use them wisely, otherwise the charges will mount
up. If you are going to maintain substantial balances
on your account, there may well be scope for bargaining
over charges. If you don't ask, you don't get!
Offshore
fund investment is another option which is especially
suitable for expatriates, as going offshore offers
a much greater variety of investment opportunities
than domestic investment funds, and many more
markets and providers can be accessed. The different
categories of offshore fund investment require
varying levels of commitment, openness to risk,
and capital, so whatever your circumstances, you
should be able to find something to suit you.
Investment in an offshore fund also provides you
with greater peace of mind, as not only is the
risk spread, but the fund is likely to be managed
by an expert with specialised knowledge and up
to the minute resources. But stick to well-known
names, and never believe extravagant promises:
only if there is cast-iron evidence of superior
returns over a long period of time should you
consider any investment which seems unexpectedly
rewarding. If it seems to good to be true, it
is too good to be true!
Funds
can be either open or closed-ended; open-ended
funds can include mutual funds, tracker funds
and UCITS, and are usually listed on stock exchanges,
although the units are bought and sold via the
fund manager, and not traded as such. The Net
Asset Value (NAV) per unit is calculated frequently,
and the information is readily available for the
investor to act as he sees fit. This type of fund
is intended more for ordinary investors.
Closed-ended
funds, on the other hand, are more suited to professional
investors, as there is less protection, and this
being the case, they are rarely (if ever) listed
on stock exchanges, as the degree of considered
risk involved would generally be in contravention
of the investor protection measures necessary
for publicly listed funds.
It
is usual for investors in closed-ended funds to
set up limited partnerships, or limited liability
companies for the purposes of tax transparency,
and to enable them to offset profits and losses.
Although the nature of closed-ended funds mean
that there is a pre-agreed closing date at which
profits will be distributed (and as a result,
this type of investment requires a greater degree
of commitment) matching and crossing services
are now offered, meaning that the needs of international
investors in closed-end funds can often be dovetailed,
to their mutual advantage.
For a more detailed description of offshore investment
funds, please click
here to visit the Investorsoffshore Guide
to Alternative Investment.
Pensions Provision For Expatriates
As
an expatriate, you will doubtless be involved
in a pension scheme already, or at least be thinking
about the issue of pension provision. Although
offshore pension planning can be more complicated
than domestic pensions arrangements, it can also
(done right) be more rewarding. The first question
must always be about your existing scheme: if
you have a substantial investment in a tax-privileged
scheme in your home country, and if you are thinking
about going back there to retire, and if retirement
is imminent, then it will probably not pay to
change existing arrangements. If on the other
hand you are quite young, and may not return to
live in your home country, then you may do better
by setting up offshore arrangements.
There
are different ways of approaching the provision
of offshore retirement income, but designated
pensions investment may at first seem the most
attractive to the bewildered expat.
Many
large and reputable organisations offer reasonably
flexible offshore pension plans (which are basically
investment schemes structured within life policies,
which can grow tax-free offshore). This type of
investment can be attractive, as much of the work
is done for you, and there are sometimes other
benefits and incentives offered as part of the
package. However, although limited flexibility
is available, it can be costly if your circumstances
change dramatically, as heavy front-end charges
and cancellation fees could negate any savings
potential.
You
might alternatively decide that you are more interested
in the DIY approach, and opt to make the decision
about the mix of investments made yourself (although
sound financial advice is a necessity here, in
order to maximise both security and capital growth
in the period before retirement). This is a cheaper
option without a doubt, as there are few (if any)
administrative costs, and no penalties for cancellation
or withdrawal if your circumstances change. However,
it can be less of a 'safe bet', and you will need
to consider the tax consequences of a change in
circumstances or relocation.
Offshore Trusts And Companies
And
finally, if you are interested in streamlining
your financial management, or protecting your
assets against possible future threat, then an
offshore trust or company may be of interest to
you as an expatriate. (It has been said before,
but bears repeating, that if you are attempting
to protect your assets against imminent or current
attack, whether from the tax- man, creditors,
or a litigious ex-spouse - DON'T BOTHER! Trying
to transfer assets offshore in order to defraud
is not only pointless, but is likely to get you
into untold trouble if you are caught out. Which
you probably will be. The time to transfer assets
offshore is before you have problems, not afterwards,
and it can then be very effective, although nowadays
more for asset protection purposes than in order
to save tax.)
In
terms of making financial management more efficient,
however, an offshore trust or company, or a combination
of the two, can be very useful, in that all assets
are essentially 'wrapped up' in one jurisdiction,
cutting down on administrative costs, and leaving
the expatriate free to acquire assets anywhere
in the world.
In
the case of an offshore trust, the settlor (you)
can be distanced from control and ownership of
assets, with the trustees 'owning' and administrating
the trust on behalf of the beneficiaries (of which
the settlor can be one, if he so chooses). Although
for the purposes of transparency (and by extension
effectiveness as an asset protection vehicle)
the trustees must be seen to have ultimate control,
the settlor will usually present them with a letter
of wishes outlining his desires and concerns for
the trust. It is therefore essential that there
is a good relationship between the settlor and
trustees, and that the persons chosen to fill
the role of trust managers are trustworthy and
reputable. In most jurisdictions there are stringent
laws governing the registration of trust management
companies and individuals.
An
offshore company is somewhat different, in that
transfer of ownership is less absolute, as although
the company will own the assets, the transferor
will still own shares in that company. This being
said, an offshore company can still provide effective
confidentiality, as the company will be a separate
legal entity, with a separate name disassociated
from that of the individual. These vehicles also
carry limited liability status, which means that
there is no financial obligation on the part of
an offshore company shareholder.
It
is worth bearing in mind, however, that offshore
trusts and companies are not cheap to set up and
maintain, and the more complicated a structure
needs to be, the higher the annual management
fees will be. If you decide that this type of
offshore vehicle is for you, consider your jurisdiction
very carefully, as the rules and legislation regarding
trusts and companies vary widely. Some jurisdictions
do not recognise trusts as such, but have established
local variations on the theme, and different IOFCs
offer different company structures and business
formats.
As
you can see, though, there are a variety of banking,
asset protection, and investment options open
to you, and the choice of jurisdiction is intertwined
with the choice of offshore structure, which is
intertwined with your personal circumstances,
obligations, and preferences. So without further
ado, onto the tricky matter of choosing a jurisdiction!
The Choice Of Jurisdiction
In
terms of relocating offshore, this article aims
to provide assistance for expatriates in a variety
of situations. Although obviously, your prime
consideration is to find a secure and profitable
location for your assets and income to be remitted
to as you move from country to country, you may
also need to consider other factors. You may choose
(or be obliged by your company) to work and become
temporarily resident offshore, or you may have
dreams of spending your autumn years skiing, or
soaking up the sun. Whatever your situation, you
need to make sure that you choose an offshore
jurisdiction which fulfils all of your needs,
and with which you can, (if you so desire) maintain
a life-long relationship.
There are several basic points to be considered
when looking at jurisdictions (for whatever reason),
and briefly, these are:
- Political
and economic stability
- Any
changes on the horizon which may impact on your
investment either now, or in the future. (The
ongoing banking secrecy struggle between the
OECD/FATF and the offshore world being a case
in point.)
-
The professional support services and financial
infrastructure. Although in order to stay in
the running as an offshore financial centre
a jurisdiction will have to maintain these at
a reasonable standard, some are better than
others in terms of providing support and additional
services to their investors.
-
The communications network. This is really part
and parcel of the above point - in order to
remain competitive, and build a good business
infrastructure, a jurisdiction must necessarily
maintain an adequate communications network.
However, as an expat, Internet facilities, online
banking and portfolio management capabilities,
and possibly e-commerce developments may be
of especial interest to you. Have you noticed
how many (all?) jurisdictions claim that within
a few years, they will be the most important
e-commerce hub in their region? Well, some are
closer than others to achieving this goal, and
it is worth keeping an eye on developments prior
to making your decision.
If your plans are to spend some time working in
the jurisdiction in which you settle your financial
affairs, you will need to look into areas such
as residence regulations and taxation, cost of
living, and employment regulations. (i.e. is a
work permit necessary? How easy is it to get one?
How long are you allowed to stay, and can you
bring your family with you?)
And
finally, if you would eventually like to retire
to your jurisdiction of choice, you will have
to consider nearly all of the above points, but
will also need to look into the lifestyles, languages
commonly spoken and climate, leisure possibilities,
and retirement income options offered by the various
jurisdictions, in order to choose the one which
best suits you and your family.
But
don't panic! This special feature addresses all
of these aspects of offshore living, banking and
investment for 20 of the major jurisdictions.Click
on the flags below to find out more about each
country!
Offshore jurisdictions come in all shapes and
sizes, and the standard of living, investment
options, and professional support vary enormously.
However, we hope that this article has clarified
at least some of the areas of concern for you,
and possibly helped you to decide where to go,
and what to do when you get there!
For
a comprehensive treatment of offshore legal and
tax regimes in over 30 offshore jurisdictions,
please visit the Lowtax
Jurisdictions Guide.
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