Offshore Fund - Advantages

Advantages

Offshore funds offer eligible investors significant tax benefits compared to many high tax jurisdictions such as the United States. For example, U.S. domestic investment products such as mutual funds are at a tax-disadvantage to non U.S. investors since dividends from such a fund are typically subject to high rates of U.S. non-resident alien withholding and taxes – typically as high as 30% on certain income paid by the U.S. fund (lower by treaty). An offshore fund can be managed similarly however without the high taxes otherwise involved with a similarly managed U.S. organized fund. Where income is repatriated (paid or transferred) to high tax jurisdictions, however, such income is usually taxed at normal rates as foreign sourced or arising income.

Many of these tax-haven locations are considered investor-friendly and are internationally regarded as financially secure.

Many offshore jurisdictions, notably the British Virgin Islands, offer a zero-tax regime for investment funds which are domiciled there, which allows the fund to reinvest that part of its investment portfolio's gains which would otherwise have been lost to tax. In addition, the regulatory regime in these offshore jurisdictions is deliberately light, with emphasis placed on the importance of balancing effective regulation for the benefit of the protection of investors on the one hand, with the establishment of a regime in which the conduct of investment business is fast and simple. A number of offshore jurisdictions have recently tightened the regulation of offshore funds.