Offshore Mutual Fund Investments

Offshore Investments Explained

What does offshore mean with respect to banking and trading accounts and why invest offshore?

The term “offshore” originally comes from banks located offshore from England in the Channel Islands, but is now used figuratively to refer to banks in many regions, particularly Bermuda, the Cayman Islands, Bahamas and politically neutral European jurisdictions such as Switzerland and Luxembourg.  London and New York are often also considered offshore centres. 

Individuals or organizations are interested in placing assets offshore for a variety of legitimate reasons, including:

  • The existence of a sophisticated infrastructure of financial institutions and professional service providers (financial firms, lawyers, accountants, corporate services, etc).
  • Lighter government regulation – though still robust and effective – in the region in which the bank or investment firm is domiciled. This may allow for a relatively favourable and cost efficient investment environment as compared to onshore.
  • Access to politically and economically stable jurisdictions. This may be an advantage for individuals who reside in politically unstable regions in which they cannot be confident as to the security of their assets.
  • Tax neutral.  Having no added local tax burden is a useful advantage for individuals who are not obligated to pay tax on worldwide income, or who may be able to defer taxation.  It also allows individuals to structure their assets without having to worry about additional local tax complications on income or capital gains.
  • Financial and generational long term planning for one’s wealth; which may include Trusts and Holdings Companies (IBCs) as part of estate and/or asset protection planning.
  • Continuity and stability of law; many offshore centres benefit from the long history of jurisprudence, providing investors certainty in their long term plans and investments.
  • Broader “global” view than often found with onshore institutions.
  • Investment platforms to access global exchanges and markets from a safe harbour.
  • Strong privacy and confidentiality laws to help protect depositor and investors’ privacy.

Note: It is strongly recommended that qualified legal and tax professionals in the customer’s country of residence be consulted in advance of moving assets offshore.