What Does The Future Hold For Offshore Jurisdictions?

Published on 09 April 2005
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With the intensifying global crackdown on money laundering, European government’s offering citizens tax amnesties for the repatriation of offshore funds and with more pressure for reporting transparency being placed on international companies what does the future hold for offshore jurisdictions?

According to some financial industry professionals the benefits of the offshore world over the onshore world are being eroded at an alarming rate.

With the introduction of the European Union’s Savings Tax Directive in July 2005 will this rate of erosion significantly increase?

With taxation and private information disclosure being the objectives of this far reaching European Union legislation, what will be the point of placing assets offshore in jurisdictions taking part in the directive such as the Channel Islands, Switzerland and Luxembourg?

According to popular industry opinion particularly in the United Kingdom, domestic financial opportunities remain unattractive, are limited and are becoming far more restrictive meaning that there is still a very real and justifiable attraction for offshore jurisdictions as havens particularly for the wealth of international clients who reside and work in many jurisdictions and who need wealth protection and enhancement opportunities in equal measures. 

Even jurisdictions like the Channel Islands, Switzerland and Luxembourg will still offer great appeal as they are well regulated, politically and economically stable and offer a wide range of offshore opportunities to many people.

Certain European countries have sought to encourage the repatriation of offshore funds prior to the introduction of the EU Tax Directive with so called ‘tax amnesties,’ but these limited windows of ‘opportunity’ have attracted minimal funds back onshore.  Italy managed to attract around 12% of offshore funds back onshore in 2002 by reducing taxation on these assets to just 5%.  Germany’s tax amnesty wasn’t even that successful because its government only reduced taxation to 25% and therefore saw even more limited repatriation.

So it seems that despite the intensification of reporting requirements globally, the crackdown on tax evasion world wide, and cross border efforts at tax harmonisation the offshore jurisdictions still retain their timeless attraction!

So what is it that still makes investing and banking offshore so attractive?  For some there are still massive taxation advantages of placing assets offshore and in taking advantage of the far wider and more interesting and diverse investment opportunities available. 

You might think such opportunities were only available to high wealth international individuals or even large multi-national corporations but did you know that even a UK resident and domiciled individual paying full UK taxes can take legal advantage of certain taxation benefits offshore! 

For example, such an individual who was able to structure their offshore investments in such a way that gains were only are taxed upon encashment could potentially draw down a tax free income from the investment and possibly cash it in at retirement when maybe they had become a lower rate tax payer.

But, it’s not just the tax advantages that attracts millions of people offshore every year, it’s the fact that offshore jurisdictions globally have been far swifter to respond to their customers’ ever changing, fast moving, complex and diverse needs, to provide discretion, privacy, secrecy and security and also to provide the services required for the protection and enhancement of individual wealth.

If you’re considering placing assets offshore you need to determine which jurisdictions offer you the services and security you require.  Certain countries are less politically secure and financially stable than others; certain countries are less suitable to residents of certain countries because of reporting requirements between those countries.  You should seek qualified professional advice before placing assets offshore to ensure you choose the right jurisdiction, that you act within the law and that you are making the wisest choices possible for the protection and enhancement of your wealth.  If you would like advice or assistance please contact us and we will endeavor to assist you.

If you would like to find out more about investing and banking offshore please feel free to order your free copy of Shelter Offshore’s ‘The Offshore Advantage’ today.

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