Tax-compliant portfolio bonds underpin the majority of offshore investment strategies for expats. When we talk about a bond here, we are not talking about government bonds or corporate bonds.
What we are really talking about is a tax-efficient investment vehicle that is held offshore. Offshore bonds are sometimes referred to as Offshore ISAs as they are similar in the way they operate.
Of course it goes without saying that your strategy MUST comply with local tax laws. When we say offshore we DO NOT mean illegal or underhand. We are talking about compliant, recognised investing strategies and they MUST comply with local legislation. This varies country to country, for example in France where any tax-compliant investment solution of this ilk should be in a wrapper known as “assurance vie”, or if it’s in Spain a “Spanish Compliant Bond”, or whatever structure is most efficient for your new country of residence. Whilst exact structures will differ, the founding principles Will remain the same. So, why is an offshore investment bond the expat investment vehicle of choice? There are many reasons:
- The first is that, unlike other investments, no tax is ever due until you actually withdraw from the bond – NOT when profit is made. This means you can defer your tax and grow your money faster.
- Secondly, there are a multitude of tax planning options that come with these bonds, allowing you to reduce or even eliminate your tax bill
- That also extends to your inheritance tax planning position – not surprising when we consider that these bonds are usually set up as a life assurance policy
- It’s extremely easy to gift some or all of the bond to a family member or child
- It’s highly internationally portable, meaning you can move to a new country and conserve the beneficial tax treatment. How much depends on the bond in question so ask your adviser
- And the bond provider will USUALLY declare and pay all tax liabilities for you – so you don’t have to. Less admin and less time wasted with the tax authorities. Good news all around.
Tax-compliant portfolio bonds: in summary
And that’s the tax-efficient portfolio bond in a nutshell. It’s a great option for international people looking to maximise the tax benefits of an expat lifestyle. Hope that helps – if you’d like to know more just drop me a line.
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