Offshore and Compliant Bonds

Tax-efficient investing and what to look out for

Offshore bonds have been the go-to option for many expat advisors in recent years. Although they can be a useful tax-efficient investment vehicle when used in the correct circumstances, the restrictive nature of charging structures can offset the benefits they offer.

A detailed understanding of how offshore bonds work is key to using them, and although investment platforms tend to be technologically advanced, flexible and easy to use, there are still locations where the tax advantages of using bonds can't be ignored.

The most important criteria to observe is how you pay for the bonds - fixed charges over a set period, usually 5, 8 or 10 years may apply.  These structures limit flexibility, especially in the first few years as closure before the end of the set period can incur substantial exit charges. 

Furthermore, as charges are measured against the initial invested capital and not the value, if poor fund performance or withdrawals takes the balance below what you invested, you'll be paying charges on funds that are not there. So, if you invest £100,000 paying 1% pa in fees (£1,000), by withdrawing £50,000 and halving the balance, you still incur a charge of £1,000 pa, effectively doubling the fees as a percentage. 

Offshore bonds often charge additional quarterly administration fees of around £100, which for smaller investments can amount to a significant increase in charges. Therefore, it is vital to understand that the fiscal benefits outweigh the investment costs.

However, they can be set up in a pro-investor way. If your location suggests a locally compliant bond should be used for tax efficiency, eg. in Spain, you can do so without fixed charging structures and on a fee-only basis. 

Although the administration of offshore bonds is often more complex, they can significantly impact the tax you pay on your investments. They also may ensure that tax reporting criteria is met, doing the hard work for you.

Get in touch today and we'll explain the benefits of using offshore bonds and if they are the correct investment for you, so you  can make an educated decision with complete peace of mind.

You'll pay only administration and custody charges of the bond and a fee agreed between yourself and your advisor, giving you full flexibility without the threat of incurring redemption charges should liquidity be required.

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Robin Matthews trading as Inveq is a member of OpesFidelio and is authorised to give financial advice subject to contract in parts of the EEA (Excluding the UK). OpesFidelio is a trademarked network of the Aisa Group which includes Aisa Financial Planning Ltd and Aisa International s.r.o. Aisa Financial Planning is authorised and regulated in the UK as an independent financial adviser for UK retail clients by the Financial Conduct Authority and has permissions throughout the EEA under both directives IDD and MiFID.  View FCA authorisation here.

Aisa International s.r.o. is authorised and regulated in the Czech Republic as a financial adviser by the Czech National Bank and has permissions through selected EEA countries. Cash and Tax services are not regulated.