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Offshore Portfolio Investment Strategy (OPIS)

Candlefocus Editor

Offshore Portfolio Investment Strategy (OPIS) was one of the most controversial tax avoidance schemes used by KPMG and other accounting firms throughout the 1990s. The strategy involved the creation of several shell companies located in different countries, such as the British Virgin Islands, the Cayman Islands, and Bermuda. Theseshell companies were used to process investments that had nothing to do with the company's real business operations. These fake investments were recorded as if the company was actually banking on their success, allowing KPMG to create artificial losses for the company on paper.

KPMG then used the artificial losses created to offset the company’s profits and reduce their tax liability. This was accomplished by using a tax loophole which allowed capital losses to be artificially created and legally used to offset capital gains. Since these offshore companies were not subject to United States income tax, the losses generated were not taxable in the U.S.

Unfortunately, this strategy is no longer allowed. Many of the companies that used OPIS have had to pay out millions of dollars in fines and penalties. The IRS has cracked down on offshore tax avoidance schemes and has made it illegal to use them to avoid paying taxes. Investing in offshore companies must now be reported to the IRS and taxes must be paid on any income generated by investments in offshore entities.

Offshore Portfolio Investment Strategies (OPIS) was and still is a controversial tax avoidance scheme. It allowed companies to pay a fraction of their true tax liability by creating fake investments and artificial losses. While such tactics are now illegal, a few companies were able to take advantage of them in the past, resulting in reduced taxes and additional profits. Thankfully, the IRS has closed these loopholes and companies can no longer use OPIS to avoid paying taxes.

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