An offshore fund is a collective investment scheme domiciled in an Offshore Financial Centre, for example Mauritius, British Virgin Islands, Luxembourg, Cayman Islands or Dublin.
Offshore funds offer eligible investors significant tax benefits compared to many high tax jurisdictions such as the United States, the European Union, India etc. However, where funds are repatriated to high tax jurisdictions, they are usually taxed at normal rates as foreign arising income.
Many of these tax-haven locations are considered investor-friendly and are internationally regarded as financially secure.
Many offshore jurisdictions, notably the British Virgin Islands, offer a zero-tax regime for investment funds which are domiciled there, which allows the fund to reinvest that part of its investment portfolio's gains which would otherwise have been lost to tax. In addition, the regulatory regime in these offshore jurisdictions is deliberately light, with emphasis placed on the importance of balancing effective regulation for the benefit of the protection of investors on the one hand, with the establishment of a regime in which the conduct of investment business is fast and simple. A number of offshore jurisdictions have recently tightened the regulation of offshore funds.