You might think that offshore investing is something only really wealthy people do. It's often misconstrued as something you might do if you're trying to hide your wealth from the tax office.
That's far from the truth. Offshore investment simply means taking advantage of investment opportunities outside the country or region in which you live. If you have a pension, you're likely to have offshore investments already. It's a lot more common than you might think – and it's totally legal.
If you're already an expat, you're likely to have an offshore bank account, whether that's in your home country or elsewhere in the world you may have lived. Offshore investing takes this one step further – rather than just holding your money overseas, you invest it there, be it in property, a business or in offshore investment funds.
We've already mentioned a few things you might invest in overseas. If you're looking to make your money work harder, offshore investment platforms are similar to those you might find at home, typically offering a mix of stocks, assets or offshore funds. Depending on your personal circumstances, these may be more tax or exchange-rate efficient than investing in your own country.
Much like traditional investment, investing offshore depends on your appetite for risk. Offshore investment may also offer advantages on top of traditional investing. As well as potential tax advantages, you may also benefit from asset protection and more privacy.
All this can create opportunities to generate higher returns. But it could also expose you to higher risks, with increasing regulatory scrutiny on a global scale and higher costs associated with offshore accounts. It's worth remembering that you may get back less than you put in, and you may wish to seek financial advice before investing offshore.
Typical benefits of offshore investment funds include:
If you're already living or working abroad, you're planning a move or get paid in a foreign currency, investing offshore could make sense. It could help you avoid big dips in the local currency – particularly if you're investing with a view to buy another asset – such as a house, or a business in the country or region where your cash is invested.
If you already own assets abroad, or you support family members living away from home – school fees, for example – keeping your investments local to them can make managing your financial commitment overseas easier. Alternatively, if the country where you're based has poor financial regulation, you may wish to invest somewhere with better regulation.
With many offshore funds offering tax benefits, you can improve rates of return simply by re-investing growth.
It's your responsibility to disclose your income to any relevant tax authorities and declare any interest earned on offshore accounts and investments. However, if the investment company has a favourable tax status, your investments may benefit indirectly if the company passes on some of its savings.
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Offshore investment can provide a tax-efficient way to invest. But you'll still need to pay any applicable taxes on any growth in the country / region where you're based. It's your responsibility to disclose any income to any relevant tax authority.
Some offshore investment accounts may charge a fixed fee, or a percentage of the amount you are looking to invest. Other fees and charges may apply so you should always read the terms and conditions thoroughly before investing.
The amount you'll need to deposit, or earn, to open an offshore investment account will vary. To start investing with HSBC Expat, you'll first need to open an HSBC Expat Bank Account, and be looking to invest a minimum of GBP/USD/EUR 100 per month or GBP/USD/EUR 1000 lump sum without advice, or GBP 250/USD 350/EUR 300 per month or GBP 25,000/USD 35,000/EUR 25,000 with advice.
You must also be 18 or over, and reside, or be situated in an eligible country or region.
HSBC Expat bank accounts are covered by the Jersey Bank Depositor Compensation Scheme, which offers protection for eligible deposits of up to £50,000. Full details of the scheme and banking groups covered are available on the states of Jersey website.
HSBC Bank plc, Jersey Branch is regulated by the Jersey Financial Services Commission for Banking, General Insurance Mediation, Fund Services and Investment Business.
An offshore investment is simply one which is based in a country / region where you aren't a resident. It's perfectly legal to invest money in offshore funds provided any income or gains are appropriately reported and taxed in your country or region of residence.
How much you can invest offshore depends on the country or region where you want to invest, and the fund you wish to invest in. There may be minimum eligibility requirements depending on the fund you wish to invest in.
Offshore investments are taxed in the same way as other income tax on your dividends from foreign shares, and capital gains on any growth. However, there may be rules in place where you're based to avoid 'double taxation'. Always check the rules in the country or region where you live. Tax benefits are based on the status of the investment company, who may then choose to pass on any savings to investors.
The funds we offer are based in Luxembourg, which offers a favourable tax status that we pass on to you. They aren't based offshore in the traditional sense, but as HSBC Expat are an offshore bank, they are still classed as offshore investments.
There's never a better time to start investing than now. Find out if you can benefit from offshore investing by speaking to one of our wealth advisers today.
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HSBC Bank plc, Jersey Branch has prepared this article based on publicly available information at the time of preparation from sources it believes to be reliable but it has not independently verified such information.
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