Offshore investing refers to investing in securities that are domiciled outside of one's country of residence. There are various reasons why individuals consider investing a part or whole of their assets offshore namely:
• Asset protection - Offshore jurisdictions such as the Isle of Man or Mauritius are highly regulated and impose strict rules on funds and investment companies residing there. Hence they are economically stable jurisdictions for investors to park a part or some of their assets in. This is particularly advantageous for individuals who reside in politically unstable regions in which they cannot be confident as to the security of their assets.
(Please refer to the Isle of Man page for more information about the stringent regulations and policyholder protection)
•Confidentiality - Most of the offshore locations provide a high level of client confidentiality/secrecy. They shall not divulge any information about the client's investments or financials to any government or tax department unless of course the subject in question is being investigated for money laundering, drug trafficking or other illegal activities.
•Tax efficiency - Most of the offshore locations have little or no local tax levied on the investments or gains realized. The key here is growth and it would hurt us if we were to pay tax on this growth. So, while our returns get compounded every year - we would still get inferior returns due to the taxes that we would have to pay on them every year! But an offshore plan allows tax-free investment growth and we can withdraw our money at maturity or after a set time period - 100% tax-free.
• Better diversification -Diversification simply means reducing risk by not only committing to investment opportunities in one sector, or one country. With an offshore plan - you get access to a wider array of funds invested in different sectors, geographies, etc. and also from reputable fund houses. This is particularly true for say a medium net worth individual - who would probably want such kind of access and diversification for his pension plan portfolio. But he would probably find it difficult and nearly impossible if he were to only consider funds available onshore. But an offshore plan makes that a possibility!
• Lower currency risk - With an offshore retirement plan - the currency risk is minimized as your investments and returns will be normally denominated in current economically stable and recognized currencies like dollar, sterling, etc. This shelters an investor from plausible asset devaluations as a result of currency fluctuations that they might experience in politically or economically unstable regions. This could be their country of residence or citizenship or business.
