Opportunities beyond the shores

Q: What is offshore investment? What are its pros and cons?

A: For people with who are not familiar with the term, offshore investment can have strange connotations. People seem to think it is the modern day equivalent of buried treasure - or at least assume there is something suspicious about the idea.

Offshore investment - or cross-border investment as it is often called - is a legitimate financial practice that can give significant benefits to investors if managed properly. It can offer a number of significant advantages as part of a broader wealth management strategy. In essence, cross-border investment means deploying financial strategies that capitalise upon the benefits offered by different countries outside your own home country.

There is a wealth of options for Dubai residents who are looking to access products based in offshore financial centres such as the Channel Islands and the Isle of Man, including savings and investment products, international mortgages and private banking services.

For many investors, the attraction of cross-border investment it moves assets to a country which offers higher rates of return or lower rates of tax, to increase the long-term return of those investments.

There is also the benefit of confidentiality: many offshore locations have strict rules regarding secrecy around assets. High profile investors often use offshore facilities to keep their identity secret during takeovers, for example, so that the market doesn't become aware of their involvement and react accordingly.

It's worth noting that today offshore services have strict rules and guidelines to ensure that they are not used to cover global illegal activity. Anti-money laundering legislation is in place that requires solid proof of identity to ensure that assets are being transferred legitimately.

Finally, people often elect to invest in specific territories because they see opportunities for growth there and wish to diversify their assets. Many investors look at developing markets and see that - as well as the incentives offered - the growth of the wider economy will increase the overall value of their assets.

However, there are reasons why you might choose not to go down this route. For one, you should take the advice of a qualified professional who specialises in this field to ensure that your investments are in line with the tax and investment regulations of your home country as well as those of the UAE.

For example, there are some government authorities, like the IRS in the US, which are clamping down on the tax advantages of offshore investments for citizens. You need the help of an adviser to ensure that your investment is in line with existing rules and also that the return on your investment will be sufficient to make it worthwhile.

- The writer is director of sales director at Nexus, a leading regional financial adviser. You can find more advice at www.nexusadvice.com. The opinions expressed above are the writer's and don't necessarily represent the views of Gulf News. Readers are encouraged to thoroughly investigate all investment decisions. Please send your questions to advice@gulfnews.com.