Even though times are changing, and the passive nature of offshore companies is considered high risk, international business corporations and offshore trusts are still used for asset protection and wealth management purposes. There is a variety of non-tax related reasons for people to use offshore financial centers in their financial risk mitigation and diversification strategies. Especially when there are corporate cross-border and global activities, asset protection avoids severe disruption of the business activities in times of crisis.
The offshore industry delivers several advantages for its customers. Since international business corporations, offshore trusts and other corporate vehicles often penetrate distinct markets and therefore are subject to different local rules. In particular the legal entities who park passive income or assets, and financial holding companies with merely administrative duties received severe scrutiny over the years. Still, there are ample possibilities for asset protection for the legitimate user.
Financial diversification and asset protection is interconnected. In a global setting companies and individuals can seek the most convenient and appropriate location to safeguard their personal and corporate belongings. Furthermore, financial optimization via offshore financial centers might lead to higher return on investment and postponed or lower tax liabilities. The result is an affordable, convenient and profitable corporate structure that protect assets and manages wealth.
Several countries around the world oblige its citizens to share their global financial holdings. This world-wide income includes most international business corporations and offshore trusts held in low and zero tax jurisdictions. Risk mitigation also includes compliance with local tax regulation in the country of residence. To fully comply with local rules, high net worth individuals could look into the various citizenship by investment programs or tax residence programs to mitigate their financial and tax burdens whilst complying with required regulation. These programs have a specific set of rules and need to be followed punctually to avoid violations and legal challenges.