OFFSHORE FUNDS
An offshore fund is a collective investment mechanism domiciled in an offshore financial centre, for example Luxembourg, Cayman Islands or Dublin. In the United Kingdom, an offshore fund is defined as a fund governed by the Offshore Fund Rules set out in the Act, Income and Corporation Taxes Act of 1988.
Advantages
Offshore funds offer eligible investors significant tax benefits compared to many high tax jurisdictions such as the United Kingdom, the United States and Scandinavia. Tax-haven locations are considered investor-friendly and are internationally regarded as financially secure. Many offshore jurisdictions, offer a zero-tax regime for investment funds which are domiciled there; this allows the fund to reinvest gains from its investment portfolio, which otherwise would have been lost to taxes.
Regulation
Typically, the regulatory regime will take a two-tiered approach, making a distinction between public funds and non-public funds. Public funds are offered to members of the public; these require a high degree of regulation to protect the public interest. Non-public funds are not open to the public and are classified as either private funds or professional funds. Investors in non-public funds are assumed to be sophisticated due to the high minimum initial investment, USD 100,000 as an example and/or a requirement that investors establish that they are professional investors.
How can you benefit from Offshore Funds?
Lower taxes result in better performance because the fund reinvests money that would otherwise been lost to taxes.
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