Offshore
We’ve all been hearing about it by different terms – offshore accounts, offshore banking, offshore companies, tax havens, tax shelters, offshore jurisdictions – just to mention a few of the more popular terms relating to the concept of “OFFSHORE”.
But, what really is it?
In a literal sense of the term, offshore means off or away from the shore.But, for the purpose of this article, offshore simply means foreign. Therefore, going offshore, is really just using the possibilities – whether for banking, or corporate services, or investments, etc. – offered by certain foreign countries whose legislation allows for certain advantages to non-residents of those countries. And, what are those advantages? Tax exemption, privacy, confidentiality, and other possibilities that are not available in other countries that don’t have such legislation.
Now, is this all legal?
Of course it is. There is no law that prevents a citizen of one country to explore their own interests in a country foreign to theirs, so long as it is allowed by the country in which that person wishes to do whatever it is they want to do. It is perfectly legal for a Canadian to travel to South America, say Colombia, and decide that they’re interested in purchasing property in Colombia.
Well, it is just the same with the other services offered by offshore jurisdictions. It is perfectly legal for a citizen of Mexico to travel to Panama, and decide at that point that they want to open a bank account in Panama, because of the tax benefits offered by the banking legislation of Panama. Therefore, jurisdictions with such and similar advantages, will be sure to attract clients and businesses who are looking for advantages that their home countries do not offer.
Why do law abiding citizens go offshore? A number of reasons:
- to increase personal privacy
- to protect themselves from invasive
- to protect against frivolous lawsuits
- to protect their assets from seizure
- to assist with estate planning
- to preserve their assets for their heirs
- to protect a percentage of their income from income taxes
- to protect a percentage of their profits from capital taxes
- to protect capital gains from capital gains taxes
- to delay any taxation
- to increase investment diversification
Looking at offshore from a different angle - it’s like taking a vacation. Years ago, only the very affluent did. At the entry level, you can open an offshore bank account in an offshore jurisdiction with about US$1,000.00 initial deposit. The cost to open and pay annual maintenance fees for an offshore trust or corporation is roughly the same as its onshore counterpart. Of course, high net worth investors have many advantages offshore and onshore which are unavailable to persons with few assets.
So, how do you go offshore? The first step is to do your homework. Do some research on the various countries and legislation before you proceed.
Having said all that, I will close here and invite you to join me again in the next issue of this publication.
