Most of us are familiar with the concept of offshore banking and investing. We might even know the names of some of the small, exotic jurisdictions that are best known for offshore investing and tax neutrality. The Cayman Islands, Belize and other locales seem to be little more than far-flung beaches with, apparently, lots of banks and brokerage houses. Even the people who hold significant investments there are not likely to ever visit the shores of these places.
Did you ever wonder what these jurisdictions get out of being tax neutral? Here, Richard Cayne of Meyer International explains why these tiny nations choose to make themselves financially attractive and become havens for offshore investors:
The biggest draw for small nations to become tax neutral offshore jurisdictions is that doing so develops an industry for them. Think about it. These small countries have little to no products to export and little industry in their countries. Aside from modest tourism business, how will the residents make a living?
By developing a profile that would make their island nation attractive for offshore banking needs, all of a sudden a whole industry opens up. This creates jobs in many sectors. From construction to build the offices to positions for people to answer the phones, build the IT systems, clean the floors and more.
With an offshore investment industry in place, these small islands are able to create jobs and wealth for their residents and a much-needed service to foreigners. For these small countries and their offshore clients, it’s a win-win situation.
Stimulate the Economy
Providing well-paid jobs for the country’s residents stimulates the local economy. According the Richard Cayne of Meyer International, “A lot of these places aren’t much more than little rocks so, all of a sudden, everyone has a decent job. It’s pretty major for them.”
Not only that, added Richard Cayne, “you also have an influx of talented labor moving there to hold the top roles in the financial departments and other highly-trained positions.” This might include private bankers, salespeople, IT experts, lawyers, accountants, security engineers and more. Now, you have the sizable incomes of these expats being poured into the local economy and people needed to provide all the services required by wealthy foreigners as well. This might include household staff, international schools and more.
Taxation for Residents and Non-residents
The draw for foreigners to invest via these jurisdictions is that there is no tax for non-residents but what about taxes for residents? Richard Cayne explained that, “There is no tax liability for any non-resident. However, for anyone living in the jurisdiction and depending on which jurisdiction they may have to pay income tax on their salary.”
For further information about offshore and other investment topics, Richard Cayne and Meyer International can be reached at (+66) 02 611 2561