One common question I often hear from folks new to offshore finance is: "What exactly do you mean by 'offshore'"?
My answer is both simple and complex.
Simply put, for any person any nation or jurisdiction is "offshore" other than the one where you reside. If you're a US resident, other countries are "offshore."
If you live in the U.K., the U.S. is offshore.
But this offshore is more often used in describing financial, banking or investment activity in another nation where taxes are low or none existent for foreigners. Charles Caine, editor of Offshore Investment points out that "offshore simply means a different jurisdiction which permits somebody from outside that jurisdiction to obtain some special financial benefit."
American Tax Haven
Indeed for anyone except Americans, the U.S. can be an offshore tax haven of great value. Billions of dollars of tax-free, interest bearing bank deposits are held in
American banks by nonresident foreigners and foreign corporations. Money held by foreigners effectively has been exempt from U.S. income tax by law since 1921.
This major tax break keeps billions in capital investments flowing into the U.S. where it's put to good use in the form of real estate ownership, government bonds and business securities. Foreign cash keeps America afloat -- without we would sink further than we have.
Certain nations have chosen to create a unique legal and tax climate that rates them as "offshore finance" centers. They cater to foreign businesses and investors, giving low tax or no tax advantages. According to the World Bank, more than half the world's wealth -- over $6 trillion -- resides in asset havens.
Offshore havens really do protect financial privacy, keep regulation to a minimum and guarantee a stable, predictable legal climate where enforcement of foreign judgments is difficult. Thus they also can be called "asset havens."
Greater Freedom
For those who seek lower taxes and financial privacy offshore, recall the words of William Lloyd Garrison, in a somewhat different context, in the cause of the abolition of slavery: "My country is the world; my countrymen are mankind."
These days, going offshore means escaping from the new slavery: government controls and bureaucrats run amok. If you haven't already, you should try it.
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