When we read that expats repatriate a considerable proportion of their wealth for long-term investment, we were surprised. There are often so many reasons for an expatriate not to send their money home, so we decided we’d better highlight the 5 main reasons why expats should go offshore.
Naturally enough, when it comes to your money it’s a case of ensuring any savings and investment path is absolutely appropriate for your personal circumstances. Therefore the following 5 main benefits of saving and investing offshore are also the most generally achievable.
If you want to ensure you’re doing the best for your own money’s management, and your long-term financial status, you owe it to yourself to explore the offshore financial opportunities that exist. Do so with qualified advice, and see whether you could enjoy some of the following 5 main benefits of going offshore.
The importance of diversification cannot be over stated when it comes to investment success. With money it’s generally not a case of putting all your eggs in one basket and hoping they hatch! Rather a careful blend of investment types across a diverse range of risk appropriate paths and products is most often recommended.
If you save or invest offshore you can gain access to: –
- Foreign investments
- Diverse assets
- Currency diversification benefits
- Different fund managers and
- Alternative jurisdictions
In other words you can broadly diversify how you invest your money.
2) Tax Advantages
The potential offshore tax benefits you could achieve will depend entirely on your personal tax status now, and in the future. Therefore you absolutely have to take qualified and appropriate advice before taking any action that could potentially have an impact on your taxation.
What’s more, you have a reporting requirement to your tax authority – and it is up to you to be aware of what your obligation is, and to fulfil it.
Having said that, there are potentially two main tax advantages to going offshore: –
1) Many offshore funds, including offshore bonds, offer tax deferral benefits. They allow the investor to defer payment of tax on policy accruals until the final benefits are taken and enjoyed.
So, rather than your earned interest and dividends being subject to basic rate tax within the underlying fund, you don’t pay anything until the end of the fund’s duration.
This means that you can enjoy compound growth benefits, and if you’re a higher rate taxpayer now, you could wait until your tax status changes before bringing your funds and gains back onshore. This could benefit you if you’re likely to be a lower rate taxpayer in the future, or if you’re moving to a lower taxed nation in the future for example. And the compound growth benefits will likely benefit every investor.
2) Some expats are fortunate enough to live in a country where the only income tax they pay is on what they earn in the nation, or remit to it. For such individuals, going offshore with their money makes maximum sense.
Such an individual can ensure all their wealth legitimately remains outside the tax net of their new nation.
There can be capital gains and inheritance tax benefits achievable offshore as well, but these require specialist advice and the potential structuring of trusts and companies.
3) Asset Protection
You may not be able to imagine a time when you would need to protect your assets. However, now that you’re living abroad, how confident are you of your new nation’s political and economic stability?
Look how quickly the world has changed in 2011 already…riots in bankrupt Greece, a wave of revolutionary demonstrations throughout the Arab world…
So, as an expat, are you confident that you should be keeping all your wealth onshore in your new nation? Some of the ‘best’ offshore jurisdictions are arguably the most economically stable and politically secure nations in the world. Think Jersey, Guernsey, Switzerland.
You may be able to find a safer haven for your money offshore.
Additional offshore asset protection benefits over and above ensuring the security of your capital can include: –
- Privacy – in the US and UK it’s very easy for anyone to find out anything about a person’s wealth status, the price they paid for their property and the profitability of their company for example – offshore it’s far harder to gain access to this information
- Investor guarantees – the best regulated offshore jurisdictions have investor protection guarantees in place
- Access to better banks and financial institutions
- Avoidance of the litigation epidemic that exists onshore in many nations
- Manage risk
4) Potential for Higher Returns
As already mentioned above in point 2 relating to the tax advantages of going offshore, tax deferral can mean you enjoy compound growth and therefore the potential of higher yields from your offshore investment activity.
If you can benefit from less or no tax being deducted, naturally you have the potential for much better returns offshore. Additionally you may gain access to better interest rates on your offshore savings.
Further benefits can be improved investment terms and reduced costs on saving and investing. All of these benefits accrue and result in you having the potential for better returns offshore.
The regulatory environments in many dedicated offshore havens are less restrictive in many cases, resulting in greater investment flexibility for fund managers and their invested clients.
You can enjoy the flexibility benefits of free remittance of your wealth too, (unlike in some nations where there are increasing controls on the movement of money into and out of the country.)
There is often less bureaucracy restricting investment activity in dedicated offshore jurisdictions too, creating a much more flexible and free environment for investment.
If you’re new to the concept of ‘offshore’, read up about the basics of offshore and expatriate finance before seeking personalised advice about how you could potentially benefit.
We have two additional resources which may be of interest, the first is entitled ‘what are the benefits of going offshore for expats,’ and it covers everything from banking to wealth management.
The second is a report that enables you to determine whether you would you be better off offshore. In it we once again encourage you to seek personalised and qualified advice before taking any action that could have an impact on your wealth and tax status.