Investing offshore: more than a tax move

The most common reason for investing offshore is probably tax. And with the tax burden in the United Kingdom and other European countries set to increase in the coming years, tax efficiency will continue to be important to investors looking for a safe place to grow their money.

But there are more advantages to investing offshore. For instance, many offshore investment centres offer a confidential environment, where details of investments are not routinely disclosed. Some jurisdictions even keep the identity of a company’s shareholders secret.

The media can unfairly portray savers and businesses who seek confidentiality about their finances as being involved in something underhand or dishonest, but such assertions are unfair.

The tax authorities of respectable offshore investment centres will typically hand over information about an investor if they are reasonably suspected of money laundering, drug trafficking and in this day and age, funding terrorism. The recent flurry of Tax Information Exchange Agreements that have been signed on the advice/suggestion of the OECD ensure that governments who suspect that their citizens have something to hide offshore can get access to the relevant information for their investigations. At the same time, such agreements are meant to contain the checks and balances needed to ensure that a government cannot just go on a fishing expedition.

Confidentiality is particularly valuable is you are a high profile investor who does not want people to copy their investment decisions (and therefore affect the price of whatever you have bought). Keeping purchases of shares confidential is also helpful to those who are planning to mount a takeover bid.

In addition to tax and confidentiality, investing offshore also offers the opportunity to organise your assets in such a way that they are protected from potential lawsuits and insolvency situations. Arranging your affairs in this way to avoid a particular liability that has already crystallised is regarded as fraud, but by and large organising your assets to reduce the general risk of them being seized (before you have decided that you are likely to be sued on a specific liability) is not typically a problem.

Finally, another advantage to investing offshore is the choice that you have available. Whether you want innovative, traditional, high risk or low risk products, there is something out there for everyone.