Offshore Investment Funds – Tax-Free For Non-US Investors

There are really no worthwhile investment funds available in Costa Rica however, in looking in the Financial Times or the International Herald Tribune, you can see thousands of international funds which you may be able to access while living in Costa Rica that will make a good Costa Rica Investment.

This country is not known for their Costa Rica investment expertise… But as an example, Fidelity, Putnam and Legg Mason Global all have about US$1 billion each invested in their various non-US mutual funds. Offshore investment funds are big business!

So there is no need to be disappointed at not finding funds because most investors become excited when they discover the significant and many rich advantages of Costa Rica investment in well-managed offshore mutual funds and hedge funds compared to investing in the domestic mutual funds offered by a US or Canada based investment advisor.

Not everyone can invest offshore tax-free, but the tax deferred compounding of ordinary income, interest income, dividends and capital gains is a very powerful advantage when accumulating assets internationally.

Some international investors may be content investing in regular, domestic mutual funds but do you really want to pay taxes that you don’t need to pay?

The most impressive offshore funds are not available through traditional US or Canadian investment firms. However, in working with qualified offshore investment professionals, you can enjoy a level of financial privacy simply unheard of onshore, far superior asset protection, access to some of the world’s best money managers and – depending on your nationality and residency and pay zero taxes.

Unlike onshore mutual funds that must report the names of all their investors, offshore funds do not report ownership so there are also asset protection benefits associated with owning offshore funds as well as significant tax benefits.

In the book “New Rules For Financial Success” by Jonathan Clements, he states that; “If you are a long term investor, your greatest enemies are inflation and taxes, not short term market fluctuations.”

As an example, your average US fund manager trades stocks actively in an effort to maximize pre-tax returns. This is normally done without thinking about what taxes the individual investor must pay.

This also applies to investors in this country and other non-US and international investors when they invest. After signing the W8Ben form, the investors here will NOT pay taxes on long-term capital gains tax distributions made by the funds but …

They will pay taxes on short-term capital gains tax distributions and, if they own individual stocks, they will also lose 30% in withholdings on all US securities dividends and interest income. What could be worse?

If an investor in this country or international investor dies tomorrow, his estate would also be required to pay estate taxes to Uncle Sam even if his remaining family still lived in Costa Rica.

The SEC says that “… taxes cut more than 2.5% from the average stock fund’s annual total return.”

Can you imagine what a huge difference that would make? Forget the fact that you might make actually more money for a moment! Let’s just think about what a difference it would make to you if your investments achieved the exact same returns except you were allowed to keep that extra 2.5% per annum.

Let’s say our neighbor Javier at age 40 had invested $100K in offshore funds ten tears ago and had earned 12.5% per annum

His friend Jose whom he’s known from University was given the wrong advice and invested in domestic US mutual funds, he also earned 12.5% during the same period but, in losing 2.5% per annum in taxes, his ten year average is now 10% per annum.

What’s the bottom line difference? Javier has $324,732 in his investment account and Jose has only US$259,374

That difference means that Javier has an extra US$65,358 more in his pocket after only 10 years and after 20 years when he is celebrating his 60th birthday party, Jose does not know this but by this time Javier has $1,054,509.38 in his investment account while he only has $672,749.99

That’s a difference of US$381,760 and remember! This is just keeping a little extra, we’re not talking about actually achieving better overall returns.

So now you know why sophisticated, well-informed international non-US investors in this country are investing in secure blue-chip, offshore hedge funds and not domestic US mutual funds.

Because they avoid all of these taxes and, when they die, they avoid losing a sizeable chunk of their assets to Uncle Sam in estate taxes. Since profits will be made outside of Costa Rica, there will be no taxes applicable inside the country.

For most non-US investors this means 100% legal tax-free investing whilst having some of the best hedge fund managers in the world managing your money!

If you would like to see more about the offshore investment book written by Scott Oliver please visit Costa Rica’s Guide To Making Money Offshore or, if you would prefer to read a client’s letter please see Costa Rica Investing in Offshore Funds.

This offshore investment book and the offshore strategies implemented are available to non-US citizens/residents and non-Canadian residents only. Canadians legally resident in Costa Rica and other nationalities may apply. Or, please feel free to contact us here

Andrew Makarik

to@welovecostarica.com

Andrew Makarik is the main editor of WeLoveCostaRica, a fan of this sunny country. He is also a loving husband and a has a lovely daughter. By being a devoted family man and the biggest Costa Rica fan, he wants to make more people feel at home there. WeLoveCostaRica unites people and helps them find new home or a new travel destination. This website is a friendly community where everyone can find not only information, but also new friends and travel pals. Andrew is also passionate about IT and programming, so he himself maintains a friendly atmosphere in this cozy environment of WeLoveCostaRica.com.