Offshore fund

An offshore fund is a collective investment scheme domiciled in an Offshore Financial Centre, for example British Virgin Islands, Luxembourg, Cayman Islands or Dublin. For the purposes of the Income and Corporation Taxes Act 1988 of the UK, an offshore fund is one which is governed by the Offshore Fund Rules[1] set out in that Act.

Advantages

Offshore funds offer eligible investors significant tax benefits compared to many high tax jurisdictions such as the United States. However, where funds are repatriated to high tax jurisdictions, they are usually taxed at normal rates as foreign arising income.

Many of these tax-haven locations are considered investor-friendly and are internationally regarded as financially secure.

Many offshore jurisdictions, notably the British Virgin Islands, offer a zero-tax regime for investment funds which are domiciled there, which allows the fund to reinvest that part of its investment portfolio's gains which would otherwise have been lost to tax. In addition, the regulatory regime in these offshore jurisdictions is deliberately light, with emphasis placed on the importance of balancing effective regulation for the benefit of the protection of investors on the one hand, with the establishment of a regime in which the conduct of investment business is fast and simple. A number of offshore jurisdictions have recently tightened the regulation of offshore funds.[2]

Regulation

Typically, the regulatory regime will take a two tier approach, making a distinction between funds which are offered generally to members of the public, which require a high degree of regulation because of the nature of potential investors, and non-public funds on the other (for example, in the British Virgin Islands, see the Mutual Funds Act 1996, which applies a three-tier regulatory approach in this manner). Non-public funds are usually either categorised as private funds or professional funds. Typically, investors in non-public funds can be assumed to be sophisticated because of the nature of the offering - there may, for example, be a high minimum initial investment, say US$100,000, and/or a requirement that investors establish that they are "professional investors". Or the fund will be designed for a small and select group of investors and the constitutional documents will limit the number of investors, say to no more than 50. Although most offshore jurisdictions permit funds to obtain licences to operate as public funds, the onerous regulatory requirements associated with such licences usually means that only a small minority of offshore funds are available for subscription by the general public.

The tax advantages of the funds encourage high tax countries to apply some laws to limit their distribution. Nonetheless, the vast majority of offshore funds operate primarily in investor markets in the United Kingdom and the U.S.A., although they are usually subject to ordinarily taxation in those jurisdictions as they apply to distributions of income arising from foreign sources.

Most offshore domiciling of funds tends to be regulatory driven rather than tax driven. The relative absence of regulation relating to leveraging and investment strategies in offshore jurisdictions encourages higher risk funds, such as hedge funds to form themselves in those jurisdictions. The vast majority of the world's estimated 9,000 hedge funds (generally considered the riskiest form of collective investment vehicle) are formed in Cayman Islands, British Virgin Islands, Luxembourg or Bermuda.

Criticism

Critics, such as ATTAC (an NGO), alleged that they are a main player of the underground economy, allowing legalized tax evasion, in particular through the usage of shell corporations practicing transfer pricing.

See also

References

1. ^ [1]
2. ^ [2]




Investment management
Collective investment schemes:  Common contractual funds • Fonds commun de placements • Investment trusts • Hedge funds • Unit trusts • Mutual funds • ICVC • SICAV • Unit Investment Trusts • Exchange-traded funds • Offshore fund • Unitised insurance fund
Styles and theory:  Active management • Passive management • Index fund • Efficient market hypothesis • Socially responsible investing • Net asset value
Related Topics: List of asset management firms • Umbrella fund • Fund of funds • UCITS

A collective investment scheme is a way of investing money with other people to participate in a wider range of investments than may be feasible for an individual investor and to share the costs of doing so.
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  • In architecture, domicile is a general term for a place of residence or "permanent residence" in legal terms
  • Domicile (astrology), the "rulership " or "house " of a planetary body. Each planet has its domicile in the sign or signs it rules.

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An offshore financial centre (or OFC), although not precisely defined, is usually a low-tax, lightly regulated jurisdiction which specialises in providing the corporate and commercial infrastructure to facilitate the use of that jurisdiction for the formation of offshore
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Motto
"Vigilate"   (Latin)
"Be Watchful"
Anthem
"God Save the Queen"
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Motto
"Mir wëlle bleiwe wat mir sinn"   (Luxembourgish)
"We want to remain what we are"
Anthem
Ons Hémécht
"Our Homeland"
Royal anthem
De Wilhelmus  1
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Motto
"He hath founded it upon the seas"
Anthem
God Save the Queen


Capital
(and largest city) George Town

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Dublin (IPA: /ˈdʌblɨn, ˈdʊblɨn/, or /ˈdʊbəlɪn/) (Irish: Baile Átha Cliath,
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The Income and Corporation Taxes Act 1988, also known as ICTA, is the foremost United Kingdom Act of Parliament concerned with taxation. ICTA was enacted in order to consolidate a number of earlier legislative provisions covering taxation.
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Motto
"In God We Trust"   (since 1956)
"E Pluribus Unum"   ("From Many, One"; Latin, traditional)
Anthem
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An investor is any party that makes an investment.

The term has taken on a specific meaning in finance to describe the particular types of people and companies that regularly purchase equity or debt securities for financial gain in exchange for funding an expanding company.
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Motto
"Vigilate"   (Latin)
"Be Watchful"
Anthem
"God Save the Queen"
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An investor is any party that makes an investment.

The term has taken on a specific meaning in finance to describe the particular types of people and companies that regularly purchase equity or debt securities for financial gain in exchange for funding an expanding company.
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Motto
"Dieu et mon droit" [2]   (French)
"God and my right"
Anthem
"God Save the Queen" [3]
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Motto
"In God We Trust"   (since 1956)
"E Pluribus Unum"   ("From Many, One"; Latin, traditional)
Anthem
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A hedge fund is an investment fund structured to avoid direct regulation and taxation in major host countries and which charges a performance fee based on the increase of the value of the fund's assets.
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Economic systems

Ideologies and Theories
Primitive communism
Capitalist economy
Corporate economy
Fascist economy
Laissez-faire
Mercantilism
Natural economy
Social market economy
Socialist economy
Communist economy


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Economic policy
Monetary policy
Central bank   Money supply
Fiscal policy
Spending   Deficit   Debt
Trade policy
Tariff   Trade agreement

Finance
Financial market
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For the oil company, see Royal Dutch Shell.


A shell corporation is defined in Barron's Finance & Investment Handbook as "a company that is incorporated, but has no significant assets or operations.
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Transfer pricing refers to the pricing of goods and services within a multi-divisional organization, particularly in regard to cross-border transactions. For example, goods from the production division may be sold to the marketing division, or goods from a parent company may be
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A collective investment scheme is a way of investing money with other people to participate in a wider range of investments than may be feasible for an individual investor and to share the costs of doing so.
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An offshore financial centre (or OFC), although not precisely defined, is usually a low-tax, lightly regulated jurisdiction which specialises in providing the corporate and commercial infrastructure to facilitate the use of that jurisdiction for the formation of offshore
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Investment management is the professional management of various securities (shares, bonds etc) assets (e.g. real estate), to meet specified investment goals for the benefit of the investors. Investors may be institutions (insurance companies, pension funds, corporations etc.
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A collective investment scheme is a way of investing money with other people to participate in a wider range of investments than may be feasible for an individual investor and to share the costs of doing so.
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common contractual fund (or “CCF”).

The CCF is an unincorporated body established by a management company under which the participants by contractual arrangements participate and share in the property of the fund as co-owners (specifically tenants in common).
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Fonds commun de placement translates to "Pooled funds", and are open-ended collective investment funds based that are neither trust of company law based. They are similar to Common contractual funds in Ireland.

Commonly referred to as FCP or F.C.P.
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Investment trusts are companies that invest in the shares of other companies for the purpose of acting as a collective investment.

Investors' money is pooled together from the sale of a fixed number of shares a trust issues when it launches.
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A hedge fund is an investment fund structured to avoid direct regulation and taxation in major host countries and which charges a performance fee based on the increase of the value of the fund's assets.
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A unit trust is a form of collective investment constituted under a trust deed.

Found in the UK, Ireland, Australia, New Zealand, South Africa and British Isles offshore jurisdictions, unit trusts offer access to
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mutual fund is a professionally-managed form of collective investments that pools money from many investors and invests it in stocks, bonds, short-term money market instruments, and/or other securities.
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An ICVC or Investment Company with Variable Capital is a type of open ended collective investment formed as a corporation under the Open-Ended Investment Companies Regulations of the United Kingdom.
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