5 July 2010

Use and Abuse of offshore fund domicile

An expert opinion just published in Austria comes to the conclusion that an offshore fund domiciled in the Cayman Islands but managed in Austria can still be seen as legally domiciled in Austria. This is relevant in case investors in the fund want to sue the fund managers for negligence. The legal protection offered in offshore domiciles is often much weaker than the protection offered in the investor's home country. Even if the legal situation is less favorable it is very expensive for any investor to sue in the tax haven. Investment managers that want to do the right thing by their investors would be well advised to dispense with such legal (and tax) trickery.