To Offshore or Not to Offshore, that is the Question

  1. Tax Advantages — with tax benefits, it is easy to see why these type of investments have become rather common with a number of investors over the years since such product offerings were conceptualized and made available not only to the big corporates but also to individuals. Offshore companies and investments can offer much more profitable tax conditions thus providing you with a worthwhile reason to proceed.
  2. Privacy — privacy and confidentiality has always been a big pull for offshore organisations. Your financial information (generally) will not be made accessible to anyone else. Good for those of you who require discretion.
  3. Low Levels of Regulation — by and large most offshore jurisdictions have lower regulatory requirements thus enabling them to offer a wider range of investment opportunities compared to their traditional and highly regulated onshore counterparts. As a consequence, for example, mutual funds and hedge funds have flourished in such lower regulated environments.
  4. Diversification of Assets — investing in foreign markets can help you diversify your portfolio of assets, thus enabling you to preserve your portfolio even when global economic conditions aren’t so favourable.
  5. Cost — now this is a contemptuous point worthy of note for both sides. From a positive standpoint, due to the increased competition and transparency in offshore investments, costs and fees have tended to decline thus providing even more incentives for potential investors to move overseas.
  1. Biased Tax Competition — offshore investments can encourage tax competition, which is lop-sided or biased. This eventually will have an impact on the economy as a whole.
  2. Transparency — the private and confidential culture of offshore jurisdictions could lead to a reduction in transparency. Many have argued that this can sometimes serve the interests of those looking to carry out illicit or criminal undertakings.
  3. Risk vs. Regulation — if there are lower levels of regulation this could imply an increase in financial markets risk, which can lead to a greater probability of subsequent recessions and potential loss of investments.
  4. Safety of Funds — even though there are increased tax benefits with offshore investments (as highlighted above), there is not always the safety net and protection that is standard when investing domestically. If you are investing overseas, ensure that you invest in a country with the right regulations, and once again, please seek professional advice in all instances.
  5. Cost — as stated in the advantages section, there is a case for this point but you must also be aware that there is a significant difference in fees and costs associated with offshore investments when compared to onshore. To obtain the aforementioned benefits stated above, you will need to pay a premium, which not only includes the one time setup fees, but also ongoing maintenance and service charges for items and products, which are generally free (or have minimal fees) in the domestic markets.

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Meedah Group Limited is a boutique consulting and advisory firm. @meedahgroup meedah.com

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Meedah Group

Meedah Group

Meedah Group Limited is a boutique consulting and advisory firm. @meedahgroup meedah.com

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