The world of financial investments is sometimes irritating. On the one hand, laws strive for transparency and investor protection in detail. At the higher level, however, there is often a huge problem. Only when it comes to finding clearly conceptualized products or types of investment straight away.
Anyone interested in offshore capital investment, for example, will discover all sorts of things on the Internet: wind turbines, ship funds, company investments abroad as well as accounts, company structures, and letterbox companies overseas. There is no such thing as an offshore investment or offshore funds. Even the term offshore is understood differently. The decisive factor is the personal investment goal.
An offshore capital investment can serve various interests: clean energy and returns or more in the area of tax savings and anonymity. In the first case, it is more about projects on the high seas. The second concerns countries outside of their own tax area, which are also not subject to the local banking or investment guidelines such as UCITS or UCITS etc.
Offshore wind farms are part of the popular renewable energy sector and the government’s subsidized energy transition plan. Two wind farms in the North and Baltic Seas are in operation, with more to follow. Advertised as a future investment, holdings promise a return of 9%. The problem: The often immature area is still subject to technical and structural weaknesses.
After a series of bankruptcies, investors in Erneuerbare Energieversorgung AG (EEV) also had to put up with losses and sued for investment fraud. The wind farm is apparently in a military training area. If it was a planning error here, there is generally the risk of unpredictable framework conditions.
If, for example, the feed-in tariffs for green electricity and transmission fees are suddenly in question after a change of government or a court ruling, the investment gets out of hand. This is one of the reasons when institutional investors hold back. In any case, in the USA, with Trump, the political wind seems to be turning away from the eco-motors.
Perhaps a renaissance in oil production in the US could help another group of investors who got into rough seas with offshore funds. What is meant are holdings in oil and gas platforms and, above all, the supply ships. This investment, which was reserved for the oil companies for a long time, enticed with high returns.
But with the drop in oil prices, the operators scaled back their activities, the ships were at anchor and the funds radioed SOS. Affected are investors in Nordcapital Offshore, among others. Here, too, there is a lawsuit. The chances are good because the prospectus apparently did not include a reference to the risks or internal reimbursements (kick-backs) .
Products with above-average yields also attract offshore financial centers around the world. It’s not just about distant countries and islands. From a European point of view, there are also locations on the doorstep, just outside the EU. The main characteristics are low taxes and low financial market regulation with more investment options. With stable political systems and legal structures, a lot of international capital is usually concentrated locally.
However, the high return opportunities are associated with risks that are lower for funds under EU rules. For example the insolvency risk of the provider or the sometimes high use of outside capital. In addition, the management costs are often higher for offshore funds.
Now there is another risk: Most of the previous tax havens have signed an OECD agreement on the automatic exchange of data. As of 2017, the German tax office will also know these deposits and credits. The anonymity is dwindling and cheating is, fortunately, more difficult.
It will also be more difficult for anyone who wants to keep their more or less correctly taxed assets in a safe place. The increasing pressure of transparency works in all directions. This applies to bank accounts similar to corporate investments, foundations, or letterbox companies.
Depending on the investment objective and personal history, there are still design options, but in the thicket of international agreements, you should discuss it with competent advisors. Agencies usually have no idea about tax law.
But when it comes to the risk of sensitive offshore capital investments being exposed, a specialist lawyer for criminal tax law is required anyway. Apart from that: depending on the country, investments from Germany can only be controlled with a great deal of risk. If there are irregularities, you may not see your money again.