When it comes to investing our money, it is essential to understand the terminology and the process.
Offshore investment is a lucrative opportunity – particularly for expats looking to maximise their returns – and here we explain what this type of investment means, and when it is most advantageous.
What it Means to be 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.
Any investment made in any overseas market is an offshore investment, and most often these are highly 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 reforms relax the rules restricting the values that can be transferred abroad. This type of investment can be used for multiple purposes:
- As a retirement investment fund.
- As a savvy way to make your money work harder.
- As a vehicle to produce tax-efficient returns.
These are more common than you might think, and many millions of pension funds are invested in offshore vehicles.
Benefits of Choosing Offshore Investments
Typically, one of the main attractions to 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 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 effective options.
International Investments for Expats
For expats living away from their country of origin, offshore investments can be a lucrative way to manage your tax liabilities while increasing the size of your asset portfolio.
As an example, in some countries, you need to pay tax on any 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 find that using this type of investment is a safe and convenient way to protect the value of the assets they have saved; allowing 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 which country you now live in.
- Diversification – choosing to invest overseas allows you a more significant opportunity to diversify your investments. By splitting your assets between different types of investment, or between different offshore locations, you have a safety net by avoiding 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 – as currencies fluctuate, this can have a substantial impact on your investment funds. By choosing to locate your investments in stable economies and currencies, you can create a natural hedge against currency fluctuations at home that might have devalued your investment funds.
These advances in the functionality of offshore investments make it easier than ever before to manage a diverse portfolio, and mean that should you choose to relocate, your finances needn’t be affected.
Comparing Investment Options
Choosing an investment can be a complicated process; so we strongly recommend working with a wealth management expert who can strategise with you and identify the best investment 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 significantly reduce your liabilities.
- Private banking – when you work with a wealth management expert, you achieve an outstanding level of confidentiality, and a dedicated level of service where recommendations made are specific to your assets.
- Offshore funds – when you invest in a pool offshore, there are 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, and so it is essential to work with a financial adviser to ensure that your trusts are reported and managed accurately.
Legalities of Offshore Investing
Offshore investments are often confused with tax avoidance schemes. However, they are a legitimate and secure way of ensuring the safety of your finances and efficiently mitigating the total taxes you need to pay.
There are, of course, rules about 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 benefits available through the global investment market.
Chase Buchanan always recommends consulting your financial adviser or working 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 always ensure that you have a full and transparent understanding of what risks are associated with any recommendations we make, as well as what returns you can expect to achieve.
Changing Countries of Residence as an Investor
Offshore investments offer multiple benefits to expats, but if you decide to relocate or move back to your country of origin, you’ll need to understand how the regulations will impact your investments.
This all depends 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 change, or may incur significant additional taxes depending on the country-specific rules.
Your financial adviser can explain the regulations depending on 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 any decision impacting your finances on a long-term basis, it is advisable to work with an expert in offshore investing to provide you with personal guidance on the ideal ways to invest your assets.
Chase Buchanan is an offshore investment specialist, and work with you to:
- Understand what you would like to achieve from your investments.
- Plan and budget for your plans, including relocations.
- Advise on the most advantageous investment routes and options.
- Structure a long-term strategy to manage your asset portfolio.
- Provide advice and recommendations about when to make changes to your investments.
Stable offshore investments can make a significant difference to your future, your family, and your finances.
Work with the experts, and ensure that whichever investment options you choose, they are designed to work for you.