Investing in your home country requires much market research, understanding of the risks and knowing the proper channels for investing. The same applies for investing abroad, except there are more obstacles to consider such as cultural differences with investments, language barriers, foreign currency exchange rates. Before considering an investment overseas, it’s important to gain deep knowledge and insight in the foreign market whether you’re investing in foreign markets, real estate or other business investment abroad or to have smooth navigation and best results possible.
Opportunities to Invest Abroad
Many countries welcome foreign investments and even offer tax benefits to those investing from overseas, which make it a very attractive opportunity for expats. But with those benefits come an extreme amount of paperwork, legal documentation and cultural barriers to ensure the foreign investment is safe, secure and complete.
Some of the commonly known international investment opportunities for direct investments include:
- Mutual funds
- Foreign stocks
- Exchange traded fund
- American depository receipts
- Global depository receipt
- Foreign companies
And in some cases, there are workshops available to give you more insight on investing in the local market that can share valuable insight as you consider an investment project overseas.
Benefits of Foreign Investments
There are many advantages for international investors on global investing so it is necessary to understand the advantages to proceed before investing.
- Growth in the international market - fast growth of economies around the world provides a larger potential growth for investments in foreign markets
- Diversification in global investing - diversifying your foreign stocks or international investing portfolio may benefit you from the fluctuations and volatility of the international markets and reduce currency risk, which can help you plan for risk adjustments
- Lower taxes for international investors - there is a possibility of higher returns on lower investments to enjoy much better returns on international funds
There are numerous countries around the world that also offer citizenship by investing in the country, either by starting a company or by purchasing a property of a certain value. By investing in the country, they offer an immediate, or within a few months, a citizenship or residency. This opportunity can expand opportunities for business development and access to other parts of the world.
Things to Consider for Foreign Investing
There are certain things to keep in mind before your investment abroad or offshore investment. To ensure a smooth investment process, it is recommended to have these things in mind and proceed with a financial advisor to guide you along the way.
Plan ahead and decide what type of investments best suit your investment objectives and reporting requirements. Starting on these principles will help guide you in directing your attention and finding an investment financial adviser who understands those kinds of foreign investments, whether international stocks, trading, foreign shares, stock exchange/stock market and exchange traded funds, etc.
Where to Invest
Living and investing from your home country and in local markets is different than investing while abroad, which is why we highly recommend you visit the country and get a sense for where you plan to invest before making the investment. Of course, this option may not be the most viable option, but it will help in making the right decision for your foreign investment. Once you’re ready to invest and with an expert financial advisor, you can get setup on a trading platform or the right resources for making a good investment abroad.
There are many things to consider when deciding where to invest, because the government, policies, taxes and cultural norms can impact your investment. Here are some examples of countries with higher per-capita income:
Whereas, here are some examples of countries with mid-range per-capita income:
This is just one small factor to consider in all the variables that will impact your investment decision on where to invest.
Taxation on Foreign Investment Income
The biggest question that comes along with where and what to invest overseas is how this investment income will be taxed, as each country has different taxation policies, banking operations and regulations.
In fact, depending on the type of foreign investment you plan on adding to your investment portfolio, it may be advised to discuss the most beneficial countries to invest in based on tax breaks or incentives. For example, American citizens must ensure they understand their taxes while abroad or with investments abroad due to the FACTA and IRS policy that states all income must be reported in the United States regardless of where the income is made -- and it’s important to file certain paperwork to avoid double taxation. So in the same way a financial advisor is going to help determine which markets are best for investments abroad, a chartered tax accountant working with foreign clients is necessary to protect yourself from any tax violations.
Once you’re ready to make the investment abroad, the next step is making the investment. Some countries require that you open a bank account in their country or handle the transaction through bank wires, which can have large transaction costs and clearance fees depending on the foreign exchange rate. These are important factors to keep in mind as you consider your investment abroad. When you’re ready to prepare your investment abroad, we can recommend expat-vetted financial institutions to guide you through the entire foreign investment process, so you can rest assured you are making the best international investment decision.