Benefits of Having your Funds Offshore

Offshore funds are assets invested offshore where tax advantages exist. The Bahamas or the Channel Islands can be considered as examples. These are funds outside the tax system of the country where the intended investor is residing.

Offshore funds offer eligible investors significant tax benefits compared to many high tax jurisdictions such as United States and the European Union. However, where funds are repatriated to high tax jurisdictions, they are usually taxed at normal rates as foreign arising income. Many of these tax haven locations are considered investor friendly and are intentionally regarded as financially secure.

Many offshore jurisdictions, notably the British Virgin Islands, offer a zero tax regime for investment funds, which are domiciled there, which allows the fund to reinvest that part of its investment portfolio's gains which would otherwise have been lost to tax.
A number of offshore jurisdictions have recently tightened the regulation of offshore funds.

Offshore funds such as overseas unit trusts, open ended investment companies and other similar collective investment schemes, have a long established position of importance among the range of savings and investment products available to UK residents.

The situation of each investor is different. Offshore investors tend to have very complex criteria governing investment selection, so in addition to standard criteria (for instance passive funds, low cost, no load etc) the following issues must also be considered.

1. Complex international tax issues typically apply. Tax considerations are urgently important. It is imperative that a competent authority on international tax law be consulted before any offshore investments are made.

2. Ensure that tax avoidance shouldn't be any investor's goal. The goal ought to be maximization of post tax wealth. It may sometimes make sense, therefore, to invest in an imperfectly tax efficient vehicle if it is better, on an after tax basis, than any other similar vehicles available.

3. Some countries largely prohibit their residents from investing in overseas domiciled investment funds (e.g., US, Canada).

4. Residents of some countries may have local investing options available which might be competitive with most of the countries but are not limited to Australia, Canada, Ireland, UK, US).

If Americans run the fund, they are subject to US laws on insider trading, taxes, the foreign Corrupt Practices Act and so forth. But it is exempt from the Investment
Company Act. The "offshore ness" of an offshore fund comes not from where your money is invested; it may wind up heavily invested in US stocks-but from the fund's being exempt from the Investment Company Act and US taxes.

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