Traditionally, ‘offshore’ referred to lightly regulated and low tax jurisdictions, which were typically to be found amongst UK dependencies such as Jersey, Guernsey and the Isle of Man, former Caribbean colonies such as the Cayman Islands, the Bahamas, and the British Virgin Islands as well as Bermuda.
All had legal systems based on the English system yet had the autonomy to set their own regulatory standards, make their own laws and. most importantly, set their own tax rates.
For wealthy individuals and families, they offered low or zero tax rates on savings and complete privacy from their home tax authorities.
In recent years, much has changed. The confidentiality offered by offshore banks and trust companies drew suspicions that offshore jurisdictions were being used for tax evasion and money laundering. The major economies, through both the Organisation of Economic Commercial Development (OECD) and the European Union (EU), threatened to put offshore jurisdictions on a blacklist and ban their citizens and companies from using them.
Offshore financial centres were forced to introduce stringent anti-money laundering laws, allow foreign criminal investigation agencies and tax authorities some access to client identities and holdings and reform some of the more contrived aspects of their taxation regimes.
Nevertheless, the leading offshore jurisdictions have adapted their tax and legal systems so that they still offer many advantages for wealthy individuals and families looking to protect and grow their assets. Getting the benefit of offshore jurisdictions is now much more complicated than in the past, and professional advice much more important, but offshore centres continue to a play key role in the efficient structuring of wealth.