Thinking of going offshore for asset protection, confidentiality or profit?

These frequently-asked offshore banking and investment questions may help you decide and realise that there are substantial benefits in using offshore financial structures to protect your assets, provide confidentiality or provide you with fabulous, tax-minimised investment opportunities.

Q. What does offshore investing mean?

A. Offshore, at least with respect to the financial world, generally means a jurisdiction other than where the investor lives. The foreign countries most favoured for investment purposes have laws which give distinct advantages to the investor or businessperson.

These laws may take the form of local no-tax or low-tax liability on all investment income regardless of the residence of the investor (Bahamas, Cayman Islands, Turks & Caicos Islands), local tax exemptions for non-residents of that jurisdiction (Channel Islands, Gibraltar, Belize, Luxembourg, Vanuatu) tax holidays for certain types of local investment (Portugal, Netherlands Antilles, Ireland, Jamaica), favourable tax treatment through treaties and agreements with the investor's home country.

Q. Do I have to travel overseas to invest offshore?

A. No. Offshore investing does not mean that you have to live overseas, sell your local investments, or even visit your foreign bank accounts, corporations or other offshore facilities. Offshore investing can be done
from your own home using email facilities on your home or business computer, also by using public telephones (use phone cards for convenience and privacy) or faxes at the local post office. Why not use the home phone or fax, I hear you ask? If you use your home phone or fax, you have just given anybody who wants to know an idea of what you're up to, and a permanent record and paper trail to your bank, adviser etc. For those less urgent requests, the mail is fine, and untraceable.

Q. What are the main reasons for having my wealth placed offshore?

A. They are:

1. Asset Protection - To secure against future claims such as bankruptcy, judgment creditors and other litigants, etc.

2. Estate Planning - Family and Protective Trusts (possibly as an alternative to a will and testament) for accumulation of investment income and long-term benefits for beneficiaries on a favourable tax basis.

3. Confidentiality - From competitors, adverse claimants and other parties from whom you wish to keep your business or personal interests private.

4. International Tax Planning - Advantageous use of foreign jurisdictions and their tax rules for reduction of tax liability.

Q. Is it legal for me to have offshore investments, companies, and bank accounts?

A. Absolutely. Because every western nation encourages international trade and enterprise, there are usually no restrictions on residents doing business or having bank accounts in other countries.

Reporting requirements on such accounts however, differ from country to country.

Local reporting requirements can be intrusive and, to a large extent, these heavy-handed rules depend solely on the honesty of the investor in question. Such is the secrecy provided by these offshore centres. Offshore investment vehicles are routinely and legally used by sophisticated and reputable high-net-worth individuals and corporations worldwide.

Q. What are the banks like offshore?

A. They are every bit as good as local banks. Banks such as Barclays, Lloyds and Citibank operate in most offshore financial havens.

Q. Is it convenient to use offshore banks?

A. Yes. These days, with email, faxing and telephone facilities and the use of ATM's, your money is just as accessible as it is at home. Only withdrawals of large amounts of cash will take a little longer.

Q. What about income tax on income I've earned offshore?

A. Australia, New Zealand, USA and most other high-tax countries require residents to declare their income on a worldwide basis. No matter where you earn it, tax is payable when income accrues to you, or in certain circumstances, when it accrues to an entity which you control. That is why most countries impose no restriction on where one's business interests, investments or bank accounts can be located.

Q. If I have to pay taxes, what is the advantage of investing offshore?

A. There are many other legitimate reasons to invest offshore which do not relate to taxes. But there are some little-known tax loopholes that can be exploited legally. However, there are other important reasons to consider going offshore as well, including asset protection, estate planning, confidentiality, better investment yields and taking advantage of active business interests overseas.

Q. I want to keep my affairs confidential for reasons other than tax minimisation. Is confidentiality and privacy guaranteed?

A. With the right choices, your privacy can be absolutely guaranteed. Except in the event of proven criminal activity (excluding so-called "fiscal offences" such as tax evasion or other money collection disputes). The USA and Australia are among some of the only countries that have criminalised tax avoidance or evasion.

Tax haven jurisdictions never respond to information requests made on the basis of tax evasion but, keep in mind, it is your responsibility to obey tax laws. Most offshore governments uphold strict confidentiality laws for banks, corporate registries, and trust companies. These laws protect offshore investors from third parties, including both private and governmental authorities.

Q. What's the minimum amount I have to place offshore to make it worth my while?

A. There is no minimum amount required. However, most people will weigh the one time set-up costs (usually US$1,500 to US$10,000 and annual fees charged by the jurisdictions for things like registration fees, etc.) and determine if it's worthwhile to invest offshore.

In my opinion, you should be looking at an investment of at least US$10,000 or have an offshore income stream that can easily be diverted into an offshore structure.

Q. Do I need a company or trust set up?

A. No, not immediately anyway. Most people establish offshore trusts and companies prior to opening bank accounts so they can use the company name to provide extra secrecy.

Quite often the beneficial owner or shareholder of a trust or company can be kept confidential or even unknown in the case of bearer shares or non-existent trust beneficiaries.

Obviously, the cost of these structures range from around US$1,000 up depending on the jurisdiction you choose and the complexity of the structure you propose.