Offshore financial centres abound worldwide, and are indeed found all around the world. Needless to say, it depends on the nationality of the person wishing to use these services as to which ones should be considered. The critical go-betweens that should be engaged by individuals or companies are the international lawyers, accountants and financial brokers who are tuned in to the advantages and disadvantages of the plethora of offshore choices.
The International Monetary Fund (IMF) list 52 offshore financial centres using their specific criteria, while the Financial Secrecy Index (FSI) group name 82, and the Organisation for Economic Co-operation and Development (OECD), on their values, list 70. Clearly each centre offers different terms and rules and opportunities, which best suit specifically chosen nationalities.
The main advantages of offshore financial centres involve issues of taxation, protection, confidentiality and diversification.
Tax reduction is always a favourite and popular theme. These centres deliberately attract individuals and companies by having tax levels way below the taxation imposed in the countries in which the customers and clients are domiciled or resident. In some cases there is a no tax applied at all, and the customers are very impressed. This enticement is obviously an attractive benefit, but must be weighed up against underlying costs and other issues before being swallowed wholeheartedly.
Asset protection is another important theme. Many respected international companies set up registered structures and funds that are in well-regulated, carefully protected and highly structured offshore jurisdictions. The companies are well looked after, including the low or ‘no’ tax issues on their registrations, and the investors are well protected too.
Confidentiality is a vital aspect for all those individuals and companies using the benefits of offshore financial centres. Secrecy and the protection against releasing any private information to any third party are of infinite benefit to everyone who wants to keep all their personal and critical financial information in-house and unknown to any outsiders. This is a foundation stone for most offshore financial centres, and one that gives security and benefit to all participants on both sides of the fence.
Then there are the benefits of the ability to ensure the diversification of investments. The companies registering in these offshore financial centres have the ability to set up funds of all types, giving investors the choice to suit all risk levels and preferences. The complete range from equity through commodity to money market to futures to umpteen other fund types covers ALL comers.
Investors therefore are not limited to a small menu of choices, and all risk levels are covered, with guaranteed funds through to low risk, medium risk and high risk, or a vibrant combination of all levels to suit the short, medium or long term investor. Umbrella structures allow investors to choose from a wide diversified portfolio of offerings under a single roof. Alternatively, a fund manager who specialises in money market funds can be used for a total and single lump sum investment.
Offshore financial centres are the answer to many prayers, and are mostly sophisticated and well respected entities. As nations change their in-house regulations, offshore centres need to adjust accordingly, but at this stage in the financial game they have all laid strong and well founded foundations that enable them to change their operations when necessary to benefit their worldwide clientele, and to key in to the forthcoming new opportunities.
The benefits they currently offer are a blessing to investors and investment houses worldwide, and a financial boon to the offshore centres themselves that thrive worldwide as a result of the advantages they offer regarding taxation, protection, confidentiality and diversification.