Nicholas and Africa Legal’s Tom Pearson talk through how an offshore financial centre operates and explain the tax implications for investors. Misconceptions about dodging tax are put on the table with Nicholas laying out how the offshore investment system works, that it is legislated and an established part of the BVI economy. For novices in high finance this is a fantastic introduction to understanding how big money moves around the globe and the tax-friendly conduits that are available to do this.
“An offshore investment centre allows people to pool investment and share risk while enjoying neutrality,” he explains.
Nicholas uses the example of a business on the ground in Africa, which employs people and pays its taxes in the country where it operates. Profits, which could come from capital receipts or dividends, are channeled back to investors through financial services based in the off-shore territories. These investors could be resident in North America or Asia, for instance, and, when they earn an income from their investment, would be liable for tax where they are resident.
The BVI takes no tax on the money that moves through its systems which makes it a far less expensive option than working through inshore financial service centres (think New York, London, Hong Kong).
“The most common understanding of the term offshore jurisdiction is that most of the financial and commercial activity deals with non-domestic clients. The BVI has a large financial services industry that is entirely outward looking,” Nicholas explains.
On the country’s domestic front, financial services and tourism are the two major industries for the BVI which comprises more than 50 islands.
On a final note, listen closely to the envy in Tom’s voice as he quizzes Nicholas about working in the Caribbean. One can only wonder how BVI lawyers and finance gurus ever make it off the beach and into the office!
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