Investing abroad may be a little daunting since there are many unknowns. If you’re new to investing or don’t have enough knowledge of the foreign markets, you may not feel very confident.
3 Important Tips for Investing Abroad
While there may be gaps in the know-how, the process of buying shares and investing abroad is not much more challenging than buying shares in the UK. There are a few rules and formalities that need to be followed, but they should not invoke fear.
There are many reasons why people like to invest abroad and buy foreign shares. One of the most common reasons is that people want to live and settle in a foreign country.
If you’re looking to invest abroad because you want to immigrate to a new country, you should hire a professional immigration lawyer from Liverpool.
What Does Investing Abroad Mean?
For people in the UK, investing abroad means buying or investing in businesses, shares, or stocks outside the UK. These investments could be foreign funds, currency exchanges, foreign companies, or foreign companies present in the UK.
It isn’t always easy to identify and access offshore funds immediately. An excellent example of this would be a funding company based in the UK but running foreign funds or accounts.
The UK has fund companies that offer individuals opportunities to invest in foreign businesses. Most UK-based funds are taxed according to British taxation policies, while foreign and offshore funds may be subject to the laws of their home country.
What this also means is that many foreign funds can reinvest their profits without paying much tax. While this is not completely valuable to you (as a UK taxpayer who has a personal income tax), the fund can roll the money and make you a higher return on your investment or lower management fees in the long term.
Can Investing Abroad Save Tax?
Most people have the misconception that you would not be liable to tax if you invest in offshore companies. This is false simply because the UK tax is wholly based on residential status and income.
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It does not depend on the origin of income. Taxpayers in the UK still have to pay tax on dividends earned on foreign shares, UK capital gains tax, and so on.
The UK does have a ‘double taxation treaty with several countries that can help prevent taxation at the income source (foreign country).
If you are unsure if the UK has a tax treaty in place, you could always speak to your fund manager before committing to purchase any foreign shares of funds.
Let us look at a few tips for investing abroad.
Start With Funds
It is best to purchase a UK-based fund that has investments in foreign shares. Domestic funds that invest in foreign shares offer diversified investment portfolios, with detailed profit and loss statements, annual returns, and risk analysis.
Having all this data before you start investing can be a boon for first-timers in the foreign investment arena. Some funds are close-ended (investment trusts) or exchange-traded funds (ETFs) listed on the UK stock market.
You can trade these funds via your local stockbroker. You can also purchase open-ended funds (unit trusts). These should be purchased through a fund management firm or funds broker, or financial advisor.
Top-ended firms may charge a higher fee than others for investments, but the returns on investments and risk assessment are better and more detailed.
Fund supermarkets and discount brokers (for open-ended funds) can help secure significant discounts on fund entries and sometimes also on the annual management charge.
Foreign Exposure Without Funds
If you do not want to opt for a fund-based investment model, you could instead buy stocks in UK-listed companies that get their revenues from abroad. Some companies are UK firms with substantial international business.
Then there are foreign companies listed on the UK stock market. Finally, some are listed abroad but trade in London using the GDRs (Global Depository Receipts). These are listed on the LSE and give UK residents the right to buy and sell shares just like regular domestic stocks.
Overseas Listed Funds
You would have to rely on a stockbroker that trades stocks in foreign exchanges. Closed-end funds and ETFs should be simple to trade.
However, open-ended funds aren’t usually sold quickly, and you will have to go directly to the fund company. Sales of foreign funds depend wholly on laws in the home country.
These three methods above are not exhaustive. There are several other ways to invest abroad. However, while investing, always ensure your money is protected at all times.
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