Fine Art of Offshore Investing

16 Apr

A. Modigliani - offshore investing

A. Modigliani

Offshore investing is one of those things that should be approached with a modicum of caution. For a small investor, the benefits may be hard to realize, the risks difficult to calculate and guard against, and the opportunity for fraud incredibly high. Many people used to invest offshore to avoid high taxes in their countries of origin.

For residents of the United States seeking some tax relief, offshore investing no longer has the tax advantages it once had. And foreign investors using banks in the EU are also no longer immune, with banks in those nations now required to turn over investment and earnings information to the appropriate tax agencies. It’s possible to keep your investment information secret, but at the incredibly high withholding tax rate of 35%.

Many non-EU member countries have also agreed to share tax and investment information as well, compromising privacy and reducing or eliminating tax-reducing advantages altogether.

So, what advantages are left for someone looking for an investment or banking opportunity overseas? To start with, the banking and financial laws of some countries still make it a crime to disclose client identities or shareholder information. This makes confidentiality still a prime reason for someone to conceal asset ownership. Major companies also (sometimes) use offshore as a way to make an acquisition if they know the price will be affected if the identity of the purchaser is public knowledge.

It’s also possible to form a shell corporation in a foreign country to avoid taxes. Some countries don’t tax foreign-owned corporations and it may also be possible to avoid local taxes because the shell corporation doesn’t conduct business within that locality. And some foreign corporations also enjoy a tax-reduced benefit by not being taxed on investments within the United States.

Offshore investing, as a strategy designed to diversify a financial portfolio, is serious business. It pays to work with a trustworthy, well-respected and acknowledge foreign entity to get the professional advice needed for your own goals and financial needs. It is also vital to have an accountant, attorney and an investment advisor who are all highly knowledgeable in offshore.

The risks you take with offshore investments are very real and very serious, so you should take as many measures as possible to protect yourself and your assets as you can if it is a viable financial component for you. Scammers, fraudsters and ‘white-collar’ thieves are all familiar with the ins and outs of working the international investment and banking industry to their advantage. Freedom from stifling regulations also means you aren’t protected by those regulations on an international level, making you an attractive target for con artists, charlatans and scammers alike.

Make sure any offers or claims or paperwork is thoroughly reviewed by professionals versed in international finance before you sign or commit to any agreement or transfer of funds. It’s much more difficult to recover your lost money after it’s left the United States and the confidentiality laws that do exist to protect your privacy can also make it next to impossible to track down your assets after they’ve been stolen.

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