Investing beyond the borders of your jurisdiction, which is also referred to as offshore investing, has quite some advantages. We will name a few here, together with some of the disadvantages of investing abroad.

Offshore investing makes up more than half of the world’s financial investments and is therefore quite significant. Offshore investing has the following advantages:

Confidentiality. Many wealthy persons investing in stocks and companies are not happy with publicity with regard to their moves. Other people might take advantage of their exposed knowledge, thus making it less interesting for the person in question to make a certain investment.
Confidentiality is not just important for unethical business, money laundering or drug trafficking. It is simply an important aspect of life to many people.

Asset protection. Offshore investment centres are popular places to redistribute income. Assets can be transferred to funds and family, without having to pay extra taxes or follwing complicated legal rules in the home country.

Tax reduction. Many of the popular jurisdictions to invest in offer significant tax reductions to foreign investors. However, the US as well as the EU jurisdictions are well aware of the tax reductions that are applicable to their richer citizens, and are therefore trying their best to prevent citizens from investing offshore, accusing them of tax evasion and considering tax evasion illegal.

Diversification of Investment. Offshore investment centers in general offer much more than the national banks and financial institutions. An offshore bank or investment centre has access to the world market and givs you the opportunity to trade in whichever currency you prefer. Any stockmarket is open for yur investments.

There are some disadvantages to offshore investing:

Cost. Investing offshore is pretty costly. Most banks require a minimum investment of between $100.000 and $1 million. In addition, there are rules in certain offshore centres that require proof of residence in the jurisdiction, which means that you would have to invest in property as well. In other cases, setting up an offshore corporation might be compulsory, leading to high investment fees for just the initial stages of investing your money.

Tightening Tax Laws. Many jurisdictions are now trying to prevent their citizens from offshore investing. The main reason is that they are losing on income, as taxes did not apply to foreign investments. Since 2004, however, the US has significantly reduced the possibility of tax evasion, by making it possible to collect taxes on worldwide assets of American citizens. The Internal Revenue Code (2004) has also made it much more difficult to profit from tax reductions in offshore centers.

Safety. Like in any business, offshore investing carries a certain risk. Be sure to do some research and to invest in a reliable and well-recognized company. Hire a professional to give you advice, but count on steep prices for these people. Also include the costs of travelling for you and your money and advisors, commission fees and professional fees.

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