Offshore Investment in Asia
By informing yourself with respect to holding assets, doing business or residing offshore, you are taking a positive step toward preserving and developing your wealth.
What Offshore Really Means
The term "offshore" describes nothing more than a jurisdiction other than the jurisdiction in which you or your business is usually domiciled. Therefore, any jurisdiction can be an offshore jurisdiction with respect to another jurisdiction. The United States, for example, is one of the world's largest offshore jurisdictions (for non-US persons). However, in most cases the word "offshore" is used to describe low or no-tax jurisdictions which usually have enacted special legislation to attract business from other countries. The British Virgin Islands is a good example for a typical "offshore jurisdiction".
There are significant advantages to investing, holding assets, doing business or residing offshore. You have a broader access to global markets and therefore more investment opportunities, your assets are protected from frivolous lawsuits and unjustified claims, you enjoy privacy and personal security, and of course there are many possibilities to legally reduce taxes.
The Use of Offshore Structures
Companies, trusts and foundations set up in low or no-tax jurisdictions (offshore trusts, offshore companies) are widely used in international business and investment transactions and offer many advantages. Although most offshore entities function as part of a tax avoidance or deferral plan, this is by no means the only objective. The following is an overview of the typical uses of offshore structures, and an explanation of why you should consider going offshore. The tax and other benefits which can be obtained by the use of offshore entities usually depend upon the country of residence (and in certain cases also on the country of citizenship) of the beneficial owners and directors and the respective anti-tax-avoidance legislation. One also has to consider the laws of any other country with which the offshore entity might carry on its business or in which it holds any substantial assets.
International trading companies are often established in offshore jurisdictions. The offshore company takes orders directly from the customer, but has the goods delivered directly to that customer from the manufacturer or place of purchase. The profits arising out of the difference between purchase price and sales price is then accumulated in either a tax free or low tax area.
Investment and Holding Companies
Funds accumulated through investment companies can be invested or deposited offshore. Although generally returns or interest payable in respect of these funds will be subject to local taxation, there are many offshore jurisdictions in which funds may be placed either in tax-free bonds, mutual funds, shares or as bank deposits where interest is paid gross. Furthermore, in most offshore jurisdictions there are no capital gains taxes. Special consideration should be given, however, to the Qualified Intermediary rules of the United States with respect to investments in US securities, in particular for US persons. Using a holding company incorporated in a suitable country may allow tax efficient business investments in a high tax country.
The use of offshore trusts, foundations and companies to effectively shield a persons assets from unexpected third party litigation, or punitive damages or similar. In a litigious society such as the United States, where wealthy individuals and families are "moving targets", an offshore trust is almost a necessity and provides excellent asset protection.
A wealthy individual with real estate and other assets in many different countries may wish to hold these through a personal holding company (an offshore company), which in turn may be held in a trust. With such an arrangement, probate can be avoided, which saves substantial legal fees and avoids publicity. Also many of our clients wish to hold real estate and other investments through an offshore entity simply because of the privacy which such offshore arrangements provide.
Acquisition and Holding of Real Estate
There are often substantial advantages in using an offshore property holding company for the purpose of holding real estate. Advantages of real estate ownership using offshore structures include avoidance of inheritance tax, avoidance of capital gains tax, ease of sale which is achieved by transferring the shares in a foreign company rather than transferring the real estate owned by the company. The same is true for the acquisition, registration and holding of private yachts and aircraft.