Q1. What exactly is offshore investing?

A1. In the financial sense, 'offshore' means a jurisdiction other than the one in which you live. Established offshore centres such as Jersey, Guernsey and the Isle of Man have laws which may offer financial benefits when you bank and invest in those locations. These laws currently range from no or low-tax liability locally (on all savings and investment income regardless of the residence of the investor) - to local tax exemptions for non-residents of that jurisdiction. There can be a high level of protection in place too and of course confidentiality and privacy levels are very high.

Q2. Who can benefit from offshore investing/saving/banking?

A2. Anyone residing outside of their home country for 183 days or more can benefit from the greater returns to be derived from offshore savings & investments simply by choosing to invest/save offshore rather than onshore. But to benefit from the low individual taxation regimes available offshore, one of two things has to be true: either the individual must have residence offshore, or for a resident in a high-tax area, there must be an offshore structure which distances offshore gains from the onshore tax net.

Q3. What is meant by the terms 'domicile' and 'resident'?

A3. 'Domicile' normally relates to the country or state which an individual regards as their permanent/ultimate home location. A person's domicile is established at birth and this remains until an individual resettles with the firm intention of remaining in that new location.
'Residence' is normally determined by an individual's status at a particular time. The rules vary from country to country, but in many cases, presence in a country for more than 183 days in any one year is enough to constitute residence for tax purposes.

Q4. What is a double taxation treaty?

A4. An agreement between two countries intended to relieve persons who would otherwise be subject to tax in both countries from being taxed twice in respect of the same transactions or events. By and large, most offshore jurisdictions do not have double taxation treaties, since they don't have much local taxation. Offshore jurisdictions which do have double tax treaties usually cannot use them to benefit investors receiving complete local tax exemption.

Q5. What is withholding tax?

A5. When a dividend (or royalties or interest) is paid internationally, the country from which the payment is made usually taxes the payment as it leaves, by 'withholding' a proportion of it, usually between 10% and 30%. If there is a double tax treaty between the two countries concerned, it is often possible to reduce the tax, or to reclaim some or all of the money. Some receiving countries allow the withheld tax to be offset against domestic tax liabilities.

Q6. How much money do I need to invest offshore?

A6. There is no absolute minimum for banking, investing or saving offshore. Many bank accounts can be opened without the need for an initial deposit, for savings these can be started with as little as $150 USD or similar equivalents in other currencies. For investing, you can invest offshore with as little as $5,000 USD at tone time or for $150 USD on a regular basis.

Q7. Should I use more than one offshore centre?

A7. Different jurisdictions have different advantages. Depending on your goals, you may find it useful to use two or even three jurisdictions in your offshore structure. Using two or three jurisdictions in an average offshore structure is very common for substantial offshore investors - one for the corporations, one for the trust, and one for the bank account. This three-level arrangement allows your offshore structure to take advantage of the best laws of each country and provides the maximum level of protection and privacy. Of course, some people prefer to have all of their assets manageable in one location – the choice is entirely yours.

Q8. What is Money Laundering?

A8. The conversion of 'illegal' money into 'legal' money. As an example, a drug-trafficker who walks into a bank with $1m USD, opens an account, and the next day transfers the money into another bank account where he invests it into a certain portfolio of company shares has 'laundered' the money succesfully. Therefore, what started out as money from an illegal source, now sits happily in the shape of a portfolio of shares that appear totally legal – that is Money Laundering.

Q9. What is a trust?

A9. A trust works by taking assets out of the ownership of the person establishing ('settling') the trust and putting them into the hands of a trustee. An offshore trust is simply one based in an offshore jurisdiction and its profits are usually not taxable there. The trustee normally follows the wishes of the settlor. Trusts, which are based in 600-year old English common law, have been in common use for offshore asset protection for nearly 100 years.

Q10. What is an Asset Protection Trust?

A10. A trust designed to accomplish a number of estate planning goals of its settlor, before and after death, including planning for the preservation of the settlor's estate from a variety of risks which would threaten to dissipate the estate if one or more of the risks materialised. An Asset Protection Trust is typically established in a jurisdiction offshore rather than the settlor's home country.

Q11. Why are offshore investments more highly regulated than other types of purchase?

A11. Regulation covers the avoidance of fraud (to protect investors from their own lack of financial knowledge), the avoidance of money-laundering (nothing to do with bona fide investors) and has prudential aspects, ie. it tries to prevent investment managers from making risky investments that could lead to loss for investors. Regulators believe that people's savings are so important they must be given special protection.

Q12. Is it legal for me to make offshore investments?

A12. This depends first on where you live. Many countries make it illegal for offshore investment providers to advertise their products domestically. Despite this, generally speaking it is not illegal for you to make offshore investments (although the US is particularly restrictive). You must check carefully with your Financial Advisor as to your rights. It is illegal in almost all jurisdictions for you not to declare the income or gains from offshore investments to your local tax authorities, and in those very few countries with remaining capital controls, to the monetary authority.

Q13. Can I transfer my pension plan offshore?

A13. Complicated question! It depends on where you live, the type of plan you have, where you plan to go, when, etc. etc.. You need specialised professional advice. There are high-tax countries which permit part or all of a tax-privileged pension fund, or the income flow from it, to be transferred offshore in a way which preserves some tax advantages, but it is not always so simple. In many cases the answer will be yes, but you will pay at least the basic rate of income tax on the transfer. Even this may be advantageous depending on your present and future circumstances. If you are planning to live offshore, it is well worth looking hard at the possibilities for transferring your pension plan for potential longer-term gains. Once again, discussing this with your professional financial advisor is always recommended because correct pension-planning should be a priority for all responsible individuals or families.

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