About Offshore Investment Accounts
Offshore banking refers to any type of bank account you have in a country other than your own. People who live in England with bank or investment accounts in the United States are banking offshore. Offshore investment accounts are set up primarily as a tax and liability reduction strategy and can be employed by anyone with the means to fund such an account.
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Identification
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Deciding to open an offshore investment account is an exciting prospect, but you must now determine which country will work best for you. If your concerns are tax-related, you must first ascertain the legalities of reporting income from offshore investments to your home country. Owning an offshore investment account is perfectly legal, but you must follow the reporting rules dictated by your country's government.
Function
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Many countries offering offshore investment vehicles are known as "tax havens" because they offer tax incentives to foreign investors. Your assets in an offshore investment account are protected as they are not held in your home country. Individuals concerned about lawsuits or other types of property seizure can transfer ownership of their assets to foreign accounts. The confidential nature of offshore accounts is based on the country's laws specifically requiring secrecy regarding corporate and banking ownership. Confidentiality does not apply to drug trafficking, money laundering or other illegal activities. In terms of diversification, offshore investment accounts allow access to international markets that may not be available to you from an account in your home country.
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Considerations
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In order to open an investment account in a foreign country, you may need to first establish a corporation there. The corporation is a shell, meaning that it does not conduct business in the foreign country, so there is very little or no tax burden imposed. The cost of setting up a corporation involves legal expenses, account or registration fees and ongoing administration fees. Some countries require that you own property there before allowing you to set up an investment account. There is also a minimum balance required, which may be an obstacle for some people.
Warning
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Offshore investment accounts are set up to reduce taxes, protect assets, offer confidentiality and as a means to diversify your investment portfolio. Before you open any type of offshore account, you will need to find a reputable legal firm to help you set up your structure in a way that will benefit you the most. Perform your due diligence on any organization before you authorize them to create a corporation, buy property or set up an account on your behalf.
Misconceptions
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Some people think of offshore accounts as only for the wealthy or that this type of structure is illegal. Though the costs of opening and funding an offshore investment account may be high, these accounts are not just for the rich and famous. Offshore accounts are also completely legal, but reporting income from offshore investments may be required by your government.
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Resources
- Photo Credit http://www.offshorebank.com
