What is offshore investing?
An expat living abroad, beyond taking advantage of the lifestyle and cost of living, can avail of investment options abroad as well.
Offshore investing is misunderstood as being inaccessible or a route for tax evasion. Most people do not consider it a good investment opportunity. Expats likely have offshore bank accounts to make the most of conversion and interest rates. Offshore investing is simply investing in assets in a country where you are not a resident. People, mainly expats, may leverage offshore investments if the country of residence has poor financial regulations, returns, or for tax efficiency.
Benefits of Offshore Investing
As there are several reasons why an investor may consider offshore assets, we look at the benefits of expanding your portfolio across borders:
1. Tax efficiency
Arguably, tax savings are the most important consideration when planning offshore investments. Most offshore locations levy 0 to minimal taxes. At the same time, these assets generate significant returns. Be sure to factor in tax liabilities where you live, although your returns may not be completely tax-free, their burden is lessened.
2. Diversification and risk reduction
Spreading out your funds across countries gives you access to different assets in different markets. With new avenues to explore, you are not limited to only those available in your country of residence. Asset classes may be similar to your country of residence, including shares and bonds, but regulation may vary. Diversifying investments typically lowers your risk exposure. Moreover, if you live in a country that may be experiencing financial or other turmoil, investments in a different country remain safeguarded.
Offshore investments are structurally suitable for assets in that they allow you to choose from investments that cater to your goals. The result is that even if you relocate, your investments are not affected. Such is the design of investments that keep expats in mind. If you have dependents living in the country where you opt for offshore investments, ease of access and financial obligations become more manageable.
4. Higher returns
In the long term, the returns from offshore investments usually outweigh those from savings accounts. Particularly, you could target your investments towards countries that offer higher interest rates and corresponding returns.
Investing abroad also comes with a few caveats. These investments come with a fee that is either fixed or a percentage of the amount you wish to invest. You may also need to clear certain eligibility criteria in terms of age, initial deposit, etc.
Offshore Investment Bonds
Offshore bonds are typically life insurance bonds that you can access through financial advisers or wealth managers. As they are located in an offshore jurisdiction, these bonds are subject to the tax laws of that jurisdiction. The bond contains different assets such as stocks, bonds, mutual funds, and more within itself.
Financial advisers provide offshore bonds alongside a pension wrapper (QROPS or SIPP). As with any investment, make sure you are aware of all relevant details, risks, and costs beforehand.
What to do?
Offshore investments can be a lucrative option for expats looking to create wealth for various financial goals. Hoxton Capital Management’s financial advisers are adept at dealing with money concerns of expats. If you have been mulling over offshore investments, you can start putting that plan into action today. Get in touch below.