Offshore Investing – Why Is It Underutilised?

There are many stigmas attached to the ideas of international, or offshore corporate bank accounts, as well as offshore companies. Basically, this refers to the practice of investing assets or setting up a company in a jurisdiction other than your place of residence, hence the term ‘offshore’. The truth is that offshore banking and offshore company formation are legitimate strategies if done correctly in respect to the laws of the investment jurisdiction and laws of person’s, or company’s, resident jurisdiction.

Unfortunately what most people see are stories in the media about cases in which these financial tools have been misused for things such as tax evasion and money laundering, and so the result is a perception that these strategies are not an option. Without international markets, the majority of businesses today would not exist. Globalisation and technology means international business operations are not just for large multinational companies. Entrepreneurs and small business can just as easily take advantage of offshore opportunities to maximise efficiencies.

Some of the most common reasons why offshore investing is underutilised are actually myths. They include:

1. It’s illegal

As outlined above many assume that setting up an offshore account or registering an offshore company is illegal because of publicised cases of criminal activities. However, these are strategies that can help to legally minimise tax obligations and improve operational efficiency.

2. It has a bad reputation, only criminals use it

It is true that offshore bank accounts have been used for illegal activities. It is also true that governments such as the US, UK and Australia have implemented programs to fight tax evasion by finding cases of people, or businesses, hiding financial assets. However, there are also plenty of successful entrepreneurs who legitimately implement offshore investment strategies.

3. I can’t afford it, it’s not for me

This is not true. Offshore company incorporation and setting up a supporting company bank account does not require high wealth. There are jurisdictions that do not require high capital investment.

4. You need special privileges to open international bank accounts and companies

There are certainly due diligence requirements, which vary depending on the jurisdiction. However, this shouldn’t be an obstacle for a legitimate business that is properly structured and operated. In fact these due diligence requirements are a necessary aspect to help eliminate illegal practices within this industry.

While the strategy of offshore companies and bank accounts may seem challenging, and require some research and planning, there are jurisdictions such as Singapore and Hong Kong that provide many incentives for entrepreneurs and established businesses and have exceptional reputations as international business centres.  Engaging an experienced corporate services firm can also help to alleviate concerns as they can develop an appropriate strategy and manage all the processes involved.