International
Offshore Financial Centres (IOFCs)
often provide a welcoming environment for
investment companies. Offshore investment
vehicles may take a variety of forms: unit
trust, mutual fund or investment company,
and may be open-ended or closed. They will
be referred to generically in this section
as 'offshore funds'. In all cases the key
reasons for being offshore are that the
gains from investment are untaxed or very
lightly taxed in the IOFC concerned, and
that the regulatory regime in the IOFC is
lighter than in the high-tax countries where
the investors and often the promoters (owners)
of the fund are to be found.
IOFCs vary
greatly in the legal and fiscal regimes
they provide for offshore funds. The most
widely-used jurisdictions are Bermuda, the
Cayman Islands, Guernsey, Hong Kong, the
Isle of Man, Jersey and Luxembourg.
Just because
offshore funds offer greater returns
and often greater risks than onshore funds,
many countries restrict investment in such
funds by their citizens, and restrict marketing
by offshore funds on their territory or
to their citizens. The USA is particularly
fierce in this regard, and offshore funds
take great care not to offend against US
law, refusing to accept investment from
US residents. The UK's regime is more permissive
while still not very flexible. The laws
and regulations of high-tax countries in
respect of offshore funds are directed not
just to limiting the behaviour of their
citizens but also to preventing 'money-laundering'
and other illicit uses of IOFCs.
The European
Union is now attempting to create a Union-wide
regulatory regime for investment funds
which is seen as being mostly negative by
funds both inside and outside the EU. As
of mid-2010, the legislation is being tossed
back and forth between the European Parliament,
which wants it to be tougher, and the Council
(the heads of the member states) which mostly
wants it to be more relaxed. It's not possible
yet to guess where it may end up, although
it is fairly sure that it will eventually
come into force, and that it will severely
restrict the EU activities of investment
funds based outside the EU. In this respect,
therefore, the EU has moved noticeably closer
to the US model. The pre-existing UCITS
legislation (Undertakings for Collective
Investment in Transferable Securities) has
been quite successful, but cannot be used
directly by non-EU OIFCs.
Of course,
individuals or companies who are tax-resident
in a high-tax country may not be able to
benefit much from the tax advantages of
an offshore fund if they are taxed on their
world-wide income, as is usually the case.
Some funds 'roll up' income and capital
gains for this reason, at least allowing
the tax-payer to defer taxation until the
fund eventually distributes gains, or units/shares
are sold.
In the Lowtax.net
jurisdictions section, information is
given about the financial sector for each
of the following completed jurisdictions:
Andorra,
Anguilla, Aruba,
Bahamas,
Barbados,
Belize,
Bermuda,
British
Virgin Islands,
Cayman Islands,
Cook Islands,
Costa Rica, Cyprus,
Dubai,
Gibraltar,
Grenada, Guernsey,
Hong Kong,
Ireland,
Isle
of Man, Jersey,
Labuan,
Liechtenstein,
Luxembourg,
Madeira,
Malta,
Mauritius,
Monaco,
The
Netherlands Antilles,
Panama, Seychelles,
Switzerland, Turks
& Caicos Islands and Vanuatu.
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be kept updated as to our progress click
here.
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