Understanding Offshore Investment Management 

When it comes to investing your money, it is essential to understand the terminology and the process to ensure you make confident, informed decisions.

Offshore investment can present a lucrative opportunity – particularly for expats looking to maximise their returns but as with every type of investment, carries risks and rewards that should be carefully assessed against your objectives.

In this guide we’ll explain what this type of investment means, and when it may be advantageous for international expatriates and global investors.

The Financial Benefits of Becoming an Investor

Investing is a way of utilising your money to produce a revenue stream, or to allow it to increase in value. There are multiple ways to invest, such as purchasing properties, making a financial investment, or buying stocks and shares.

Importantly, investment varies from any alternative savings vehicle in that the risk you accept corresponds with the potential returns you can achieve – making a thorough risk analysis key to creating a bespoke portfolio that conforms with your expectations.

Offshore Investment Management Explained

Any investment made in an overseas market is an offshore investment, and most often, these are more attractive in countries where tax regulations offer a higher rate of return. The only substantial difference to any domestic investment is the location of the fund.

Over the last few decades, offshore investments have grown in popularity as the rules restricting the values that can be transferred abroad have been relaxed. These types of investments can be used for multiple purposes:

• As a retirement investment fund.
• As a structured way to make your money work harder.
• As a vehicle to produce tax-efficient returns.

Offshore investment products may be more common than you think, with many millions of pension funds invested in offshore vehicles as one example.

Management refers to the way finance professionals and accomplished wealth managers oversee those portfolios, monitor performance and returns, advise on opportunities and changing risks, and suggest adjustments or products to strengthen the diversification, risk profile and returns achieved by your offshore investment portfolio.

What Are the Advantages of Choosing Offshore Investment?

Typically, one of the main attractions of investing in a fund based in another country relates to tax regulations. As the global investment market becomes more accessible, being able to choose countries where assets are taxed at much lower rates offers a secure way to achieve higher returns and greater financial stability.

Provided returns on these investments that are returned to you in your country of residence are declared and taxed appropriately, there is nothing untoward about choosing offshore investing as an efficient and smart way of maximising the value of your investment funds.

For support with understanding the taxation rules and how offshore investments would impact your obligations, it is always wise to work with a financial adviser who can provide advice about the most tax-efficient options.

Comparing International Investment Options for Expats

For expats living away from their country of origin, offshore investments can be an appealing way to manage your tax liabilities while increasing the size of your portfolio.

For example, in some countries, you pay tax on interest you accumulate through savings. Choosing to invest offshore in a country with lower rates of tax means that by moving your savings overseas, you will reduce the amount of tax you have to pay.

Expats often find that using this type of investment is a safe and convenient way to protect the value of the assets they own, offering the security of knowing their future income is protected.

Particular benefits of offshore investment for expats include:

• Tax efficiencies: Countries with zero tax or very low taxation rates can dramatically reduce your tax liability and are often accessible regardless of where you now live.
• Diversification: Choosing to invest overseas allows you an opportunity to diversify your investments. By splitting your assets between different types of product, or between locations, you have a safety net that can help to avoid potential risk.
• Global accessibility: As overseas investments continue to grow in availability, managing international investments is becoming more streamlined. Many offshore products have services specifically designed for expats, such as accounts available in multiple currencies, and overseas mortgages.
• Risk management: Currency fluctuations can have a considerable impact on your investment funds. By choosing to locate your investments in stable economies and currencies, you can create a natural hedge against volatility that might have devalued your investment funds elsewhere.

Ongoing advancements in the functionality of offshore investments make it easier than ever to manage a diverse portfolio, and mean that should you choose to relocate, your finances needn’t be adversely affected.

Various Offshore Investment Options for Expatriate Portfolios

Choosing an investment can be a complicated process; we recommend working with a wealth management expert who can strategise with you and identify the best options for your circumstances and aspirations.

There are lots of options to consider, all of which depend on how you would like to invest and what you would like to gain from your offshore investment fund.

Here are some of the most common terminologies associated with offshore investments and what they mean:

• Offshore banking: For expats, any bank located outside of your country of origin is considered an offshore bank. Simply moving your savings to a location with minimal or zero tax can reduce your liabilities.
• Private banking: These accounts and products provide confidentiality, with a dedicated level of service where recommendations made are specific to your assets.
• Offshore funds: Investing in an offshore fund can provide multiple ways to diversify your portfolio. Well-managed funds can provide excellent investment returns and are typically created for non-residents of that country – making them ideally suited to expats.
• Offshore trusts: An offshore trust is a way in which assets can be invested to avoid heavy taxes, such as inheritance tax. This type of trust is most often accessed by expats. Note that the regulations around the use of such trusts are robust, so it is advisable to work with a financial adviser to ensure that your trusts are reported and managed accurately.

If you require further clarification about the nature or structure of any offshore fund or account you currently hold or are considering adding to your portfolio, you are welcome to get in touch with your nearest Chase Buchanan office to discuss.

The Legalities and Potential Complexities of Offshore Investing

Offshore investments are often confused with tax avoidance schemes. However, they are a legitimate and secure way of safeguarding your finances and efficiently mitigating the total taxes you need to pay compliantly and according to all the appropriate rules.

There is, of course, legislation that dictates how much you can invest, when and where, and how the returns on these investments are reported; but an offshore investment is simply a way to take advantage of the possible returns available by participating in the global investment market.

Chase Buchanan always recommends you consult your financial adviser or work with a wealth management professional to ensure your investments are made in reputable and stable offshore funds and are always disclosed as required.

Every investment carries some level of risk, and our consultants ensure that you have a full and transparent understanding of the risks associated with any recommendations we make, as well as the returns you can reasonably expect to achieve.

Changing Countries of Residence as an Investor

Offshore investments offer multiple possible benefits, but expat investors who decide to relocate or move back to their country of origin will need to understand how the regulations will impact their investment assets.

Much may depend on where you are relocating from and where you are moving to – but a well-managed international investment fund located in a tax-efficient offshore location may not require any urgent changes or could incur additional taxes depending on the rules in each respective jurisdiction.

Your financial adviser can explain the regulations according to your relocation plans to allow you to prepare your finances in advance.

Why Expert Support is Essential for Successful Offshore Investment Management

As with any investment or decision impacting your finances on a long-term basis, it is advisable to work with an expert in offshore investment to provide you with personal guidance on the ideal ways to invest your assets and manage your portfolio over the long term.

Our teams of private wealth managers, tax advisers and investment specialists work with expatriates around the world and can offer you the following:

• Support to define what you would like to achieve from your investments.
• Help with planning and budgeting for upcoming and future outgoings, including relocations.
• Guidance on the most advantageous investment routes and options.
• Assistance in structuring a long-term strategy to manage your asset portfolio.
• Personalised recommendations about when you may wish to make changes to your investments.

Stable offshore investments can make a significant difference to your future, your family, and your finances, but require ongoing oversight and professional, reliable management to ensure your returns and risk exposure remain consistent with your requirements.

Working with experts will ensure that whichever investment options you choose, they are selected specifically for you.

*  Updated September 2024