When the economy is not doing well at home investors are often tempted to look offshore. When this is as simple is buying stocks of foreign companies via American Depository Receipts (ADRs) the approach and tax consequences are pretty much the same as when investing in American stocks. But with a more exotic approach, such as foreign real estate investments, investors need to able to examine fundamentals at a distance, in a foreign language, and often times travel to foreign locations. And then there is the issue of taxation. There are legal offshore tax havens and there are, what amount to, tax traps for the foreign investor. Where are good places to invest offshore from the USA? And what are the best ways to invest? Read on for a bit of offshore investment advice.
Growth Leads to Profitable Investments
Some time back our offshore investment advice was that one consider investing in middle class growth in Latin America. Strong economies commonly develop strong middle classes and the purchasing power of the middle class further drives the economy. Latin America has been growing and so has its middle class. The middle class has grown by a forth in the last ten years. Per capita income south in Latin America has gone up from $7,000 a year range to just under $12,000 a year. Things have slowed since the 2008 market crash and recession but the middle class has not lost ground. Investing in growing foreign economies is not limited to Latin America. Economic growth is slowing in China and around Asia but there are still lots of opportunities.
Taking Cues from the American Experience
Great stocks to invest in during the early twentieth century in the USA included the likes of General Electric, AT&T, Coca Cola, and virtually any public utility. As infrastructure was developed, those doing the work were rewarded. As people earned money they spent it and companies like Coca Cola learned to cater to the American taste for soft beverages. Our basic offshore investment advice is to take a look at developing economies in Asia and Latin America and find out who is likely to profit as infrastructure is improved and made more widely available.
They Do Not Make Any More Land
One of the basic tenets of investing in property is that there is a limited supply. Good farmland in northern Iowa used to sell for one hundred dollars an acre, and then a thousand, and now commonly $10,000 an acre. Land in downtown Tokyo is exorbitantly expensive but was not always so. Land used to be cheap in the banking district of Panama City, Panama and now goes for thousands of dollars a square meter. Good offshore investment advice is to look where the action is and is likely to be and buy property before the prices go into the stratosphere. But, what do you do when the price goes up? Do you sell?
Offshore Investment Advice about Taxes
US tax on foreign source investment income can be significant but as a rule income must be realized in order to be taxed. If you are lucky enough to buy downtown property in a place like Panama City, Panama, Rio de Janeiro, Brazil or even Manizales, Colombia before prices go up you do not need to cash in and take your profits. A reasonable way to benefit from your good fortune is to set up a long term lease with a local business, collect and pay taxes on the rent checks, and let the property increase in value over the years.