Global Crisis’ is a term that is thrown around a lot lately, but what does this actually mean and how does this affect the individual and the offshore environment?
In short Debt is considered to be substantially to blame for the current crisis. Large scale external debt, like the debt between countries where underdeveloped countries have borrowed money from other richer governments, that they can’t repay, and small scale internal debt where banks have been lending to individuals without maintaining enough available capital to cover their commitments. The interest on these debts both external and internal is now at a level of interest which is making them almost impossible to pay leading to this ‘Global Crisis’.
At this point large scale external debt between countries needs to be and is being written off as it is causing huge social and economic restrictions on many of the poorer third world countries which in particular affect the people their already living well below the poverty line.
Internally a lot of individuals have been hit very hard. Banks are not lending like they used to making it impossible for new businesses to function and many have gone out of business and this will shape the future for generations to come. Existing loans are being called in which has flooded certain aspects of the market, for instance property. Seized property is being sold off at a fraction of the cost price, whilst this sounds like a good thing, as the banks are not lending it is only individuals with money that have survived the depression that can benefit from the cheaper properties whilst people looking to sell who are struggling financially are suffering large loses dues to the lower prices.
So what exactly does this mean for the offshore environment?
There are the clear advantages to going offshore, such as Asset Protection whereas Limited liability means that business creditors often may only pursue the business for settlement meaning that the individuals personal assets such as family home are safe. Depending on the offshore structure it is often possible for the individual to keep assets and trading very separate therefore if some woe was to befall one it would not necessarily affect the other.
Other advantages include tax benefits. Many offshore jurisdictions are offering corporate tax from between 0% – 10% much cheaper than their onshore counterparts.
Regulations with concerns to dividend payments, capital gains tax, wealth tax, stamp duty and inheritance tax are very inviting in the offshore environment although these differ from Jurisdiction to Jurisdiction and it is recommended that clients seek professional advice with regards to these.
In short, offshore can prove much cheaper and easier to manage than its onshore counterpart and may offer peace of mind. Whilst governments and banks are trying to squeeze as much as possible out of the individual to recoup its financial standing , with offshore many governments in various jurisdictions are promoting lower taxes and offering incentives to bring investors in, in order to build on the wealth and economy of the particular jurisdiction.