Contrary to what you may have heard, offshore does not necessarily refer to a faraway land or tropical island in the middle of nowhere. In fact, anywhere outside of your domestic environment is, ipso facto, offshore.
Depending on your citizenship, where you live, any relevant tax treaties, your source of income, and what your investment objectives are, nearly any country can be offshore. For example, Canada can be considered offshore to an American, just as the Isle of Man can be considered offshore to a German.
There are many terms thrown around when it comes to investing offshore, but a few important ones to consider as an expat are “low-tax district,” “tax haven,” and “offshore financial centre (OFC).” These simply refer to a country in which an investor places his or her assets because of the country’s low(er) taxes.
In fact, by some estimates, more than 15 percent of countries could be considered tax havens. Therefore, when you invest in a low-tax district, you are basically investing in a foreign country that has favorable tax laws.
In future articles, we shall discuss the economic, psychological, and even moral implications of investing offshore. However, for the moment, I wanted to make sure that we had a common understanding of what offshore means in terms of saving and investing.
Just as being an expatriate might mean you are living and/or working in a country other than where you were born, investing offshore means you are investing in a country other than the one you are currently living in.