15 January 2021
What is offshoring? Pros and cons
Recently, the offshore world has increased in popularity and everyone can easily find references to companies and businessmen who have successfully reduced their taxes to zero. More and more investors are aware that moving offshore can not only reduce their taxes and provide a secure financial base but also open the door to new channels of the global economy.
For someone taking their first steps in the offshore world, we are aware that the amount of information available can be overwhelming and sometimes confusing. To meet our clients’ expectations, we have prepared a series of articles that will help everyone understand the strategies of moving overseas. Here, you can learn more about Offshore Trusts. This article will help you to open your first bank account. Below you can find both the pros and cons of going offshore.
What does offshore mean?
The so-called offshore concept is nothing more than moving a business, bank account, or/and yourself to a place outside of your country of citizenship. There are different reasons to do so: to seek more privacy, to reduce income tax, to provide security for one’s assets, etc. Offshore strategies will vary depending on the business activity, your country of origin, the assets at your disposal, and the ultimate goal.
Pros and cons of going offshore
Just like any choice, moving offshore has its advantages and disadvantages. Positive aspects will include the ability to protect your assets from opponents, creditors, attorneys, or even family members. People are often unaware that it takes only a lawsuit to freeze their bank account and deny access to their funds. Moreover, market failures and climate disasters can also cause a loss of all economic resources. Trusts or/and bank accounts located outside of your country can effectively protect you from such threats.
Another good reason to move overseas is to increase your privacy. Many individuals rightly keep some of their finances private to protect them from third parties. Understandably, multimillionaires or public figures do not wish the media to know about each of their investments. Some people also want to keep their finances private in case of a divorce or greedy family members. Whatever the reason is, corporations and bank accounts located abroad can easily provide you with the privacy and freedom you desire.
While speaking about freedom, we must mention the possibility to access new markets, stocks and investment opportunities. Many American Crypto investors cannot participate in some ICOs (Initial Coin Offering). U.S. citizens are considered a risk when complying with tax and other regulations. This problem can be solved by just having citizenship in another country.
Incorporating overseas can also help you to buy property in a chosen country. In some jurisdictions (e.g., Hong-Kong, Montenegro) it is not possible to purchase a property and title it to your name, it must be owned by a corporation located in that country. To solve this problem, one can set up a company in a given country and indicate one’s current business as a shareholder. This will create a subsidiary and allow the purchase of the real estate.
When talking about the advantages, we must also mention the possibility to lower your taxes or even reduce them to zero! As we have explained in this article, there are many offshore strategies that can contribute to tax reduction.
Due to the offshore world gaining popularity and expanding, plenty of pseudo-financial advisors have emerged. Many of them are not familiar with offshore strategies resulting in misleading information and causing you to break the law. As we all know, a well-thought-out tax reduction is legal; evasion is not.
One should also be aware that moving offshore is not cheap. Banks may lay on very high fees for the account opening, maintenance, and even wire transfers. Corporations have registration and annual fees. Additionally, you must take into account the fees imposed by the law firm that will represent you.
Finally, we would like to mention the language barriers and cultural differences. An investor from a country where everything works according to a schedule may be surprised by the mindset of people living in the Caribbean and Latin America. Their work approach is usually based on the phrase “Mañana, mañana” (tomorrow) and they are not used to work according to prescribed time frames.
Send us a note to [email protected] if you need help going offshore. Our team has the knowledge and experience to assist you.
Written by Magdalena Wczesna
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