Offshore investment is the keeping of money in a jurisdiction other than one's country of residence. Offshore jurisdictions are a commonly accepted solution to reducing excessive tax burdens levied in most countries to both large and small scale investors alike. Selected offshore domiciles are superficially viewed by some as havens used to conceal or protect illegally acquired money from law enforcement in the investor's country. Although this may occasionally be the case, legitimate investors also take advantage of higher rates of return or lower rates of tax on that return offered by operating via such domiciles. The advantage to this is that such operations are both legal and less costly than the solutions offered in the investor's country - or "onshore". Locations favored by investors for low rates of tax are known as offshore financial centers or (sometimes) tax havens.

Offshore solutions are accessible to anyone who can meet the minimum investment amount or pay the obligatory fees required to open such an entity.

Tax is the driving force behind 'offshore' activity. Due to offshore solutions investors are able to conduct investment activities in a profitable fashion. Often, taxes levied by an investor's home country are critical to the profitability of any given investment. Using offshore domiciled special purpose vehicles an investor may reduce this burden allowing the investor to achieve greater profitability overall.

Another reason why 'offshore' investment is superior to 'onshore' investment is because it is less regulated, and the behavior of the offshore investment provider, whether he be a banker, fund manager, trustee or stock-broker, is freer than it could be in a more regulated environment

Reasons for offshore investment:

Avoidance of forced heirship
Asset protection
Less regulated (for example, hedge funds, which thrive in low regulatory environments due to their highly aggressive investments strategies thrive in offshore jurisdictions, principally the Cayman Islands
Privacy
Tax advantages (legal)
Money Laundering & Tax evasion (illegal)
Shown below is a link to an October 2007 article in the Austraiian business press that is generally pro-tax haven:

Philosophical reasons against offshore investment:

Wealth earned in one (taxed) economy is taken out of circulation (i.e., it cannot be taxed again when re-spent to provide services and infrastructure).
Ethically, it might be considered an abuse of the notion of national sovereignty that facilitates a lack of transparency to regulators of financial transactions.

It encourages Tax competition between states, provinces, countries, and regions in the way that the search for ever cheaper source of manual labor brings down wages everywhere.

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