As a senior international professional, you know that ‘offshore’ simply refers to any (business) activity that takes place outside an entity’s home base.
In finance, the term simply describes areas where regulations are different from your home country.
It’s likely you have moved your personal finances or business offshore for more favourable conditions.
Below, we explore those a little more.
Offshore banking is common for companies and high-net-worth individuals (HNWIs).
You may also choose to bank and hold investments in a specific country offshore if you travel there frequently.
Offshore locations are generally island nations, where entities set up corporations, investments, and deposits.
Specific locations that have become popular for offshore business activity are island nations like the Cayman Islands, Bermuda, the Channel Islands, and the Bahamas.
Other centres in landlocked countries, including Switzerland, Ireland, and Belize, also qualify as popular offshore financial centres (OFCs).
The level of regulatory standards and transparency differs widely among OFCs.
There are many benefits to offshore banking, ranging from peace of mind (no one will care about your money as much as you), security, privacy and a personal level of service.
Generally, the 7 main benefits of offshore banking are:
- Security and protection of your capital, especially during times of instability
- Privacy and service levels
- Convenience and accessibility to funds
- Favourable tax laws leading to savings on deposits, savings and investments
- Access to international investment opportunities
- Preferential foreign exchange services
- Superior lending, leveraging and credit facilities
Let’s explore each benefit in detail.
1. Security and protection
Your or your company can use offshore accounts to avoid the unfavourable circumstances associated with keeping money in a bank in your home nation.
By using an offshore bank, based in a highly regulated, transparent jurisdiction, such as the Isle of Man for example, you can feel secure that your money is safe.
Holding offshore bank accounts makes it more difficult for them to be seized by authorities.
Remember what happened in Cyprus in 2013?
Expats were suddenly blocked from taking any money out of their accounts and out of the country.
By banking offshore, you remove your wealth from threats such as these.
2. Privacy and service levels
One of the attractions of having your accounts held outside your home country is the privacy you get.
Bank secrecy in some countries like Switzerland and Singapore is a legal entitlement, and banks cannot disclose details of their account holders or assets, except in extreme circumstances like a criminal investigation.
This has led to widespread tax evasion, but many banks and governments have moved forward in recent years to ensure all money upon which tax is due is declared, and new anti-money laundering rules are in place.
And as well as complying with these robust standards, expats may still be able to enjoy more privacy from an offshore bank than they can from an onshore one.
Around the clock help if something goes wrong, with access to telephone and online banking 24 hours a day, 7 days a week, 365 days of the year – usually come as standard.
3. Convenience and accessibility
As an international professional, being able to keep your bank account in one place, no matter how many times you move countries, is a major benefit.
In fact, this reason alone is enough for many people to open an offshore bank account.
4. Tax planning
There can be expat tax advantages to using an offshore bank – but whether these apply in your case will depend on your personal circumstances, such as country of residence.
Also, some account holders who bank in jurisdictions like the Isle of Man and Jersey, for example, can choose to receive interest on their savings tax free.
The interest is credited gross to their account, which means there is no income tax deduction at source.
As an expat, this removes the need to reclaim tax paid, and avoids the hassle of reconciling your tax returns to ensure you are not over-paying tax.
An offshore bank account can also be useful when it comes to estate planning.
In many countries, local law will dictate what happens to your wealth if it is held in a local bank. Offshore banks solve this problem.
For example, in places like Dubai, Abu Dhabi, Qatar and Riyadh in the Middle East, if you were to pass away, Sharia Law would be applied to local accounts.
This would mean that such accounts would be frozen until probate is granted, which in some cases, could take years.
So, if you work in one of these countries, banking offshore is a good idea for estate planning purposes.
5. Investing offshore
Offshore investing is common for high-net-worth individuals.
A good offshore bank will provide you with a wide choice of funds and investments that are not usually available either in your home country or where you are currently living.
However, select your bank carefully, some just white label other’s solutions and offer poor choice.
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Read our reviews of popular offshore banks here.
Don’t forget you will need to think about what the purpose of investing is, how long you want to invest for, how much risk you are prepared to take with your funds and what fees and costs are involved in running an investment portfolio.
6. Preferential foreign exchange services
For those who work internationally, the ability to save and use funds in a foreign currency for international dealings can be a benefit.
With multi-currency accounts usually coming as standard, transferring money between accounts will be fast and free.
And, if you need to transfer money between currencies, some offshore banks provide a competitive foreign exchange rate, compared to a regular banking service.
This is one of the biggest advantages of offshore banking facilities for expats with international financial obligations.
7. Lending, leveraging and credit
Once your new banking arrangements are open, you will often be able to apply for a mortgage or lending facilities.
The best offshore banks will usually be flexible in their lending arrangements, and you will often find competitive mortgage rates available for property, particularly if buying in a mainstream market like the UK.
An offshore bank might be a suitable solution if you’re interested in:
- Flexible and easily accessed consolidated structured lending.
- Floating interest rates linked to the prevailing prime rate, fixed interest rates or forward fixed rates.
- A service catering for individuals, trusts, close corporations and companies.
- The option of multiple sub-accounts for multiple assets or personal administrative and/or debit order requirements.
- Commercial property finance.
- Finance of selected property development projects.
- Equity-geared lending.
- Preference share lending.
Offshore banking will not be right for everyone.
The benefits and tax rules associated with offshore banks highly depends on your circumstances.
Download our free guide if you’d like to know more about how high-performance execs build on their £1 million+ portfolios, or contact us for comprehensive financial planning advice and a discussion of your banking options.
— Update: 07-02-2023 — cohaitungchi.com found an additional article Top 8 Benefits Of Offshore Bank Accounts That Urge You To Move from the website bbcincorp.com for the keyword benefits of offshore banking.
Offshore bank accounts are effective vehicles that help you manage business finances with ease. In today’s article, let’s clarify 8 benefits of offshore bank accounts that you cannot find in domestic banking systems.
What are 8 benefits of offshore bank accounts?
Not only does offshore bank account benefit individual account holders, but it also acts as powerful means of protection and convenience for offshore businesses. Why should you open offshore bank accounts? Let’s get the answer below!
As a matter of concern, taxation optimization is the top priority of most companies going offshore. High tax burden makes people hesitate to open a bank account in their home country.
By contrast, opening an offshore bank account in tax havens offers a favorable tax regime – either a lower tax rate or even no tax rate at all.
In this way, you can keep your money out of reach from the tax authority of your resident country, protecting it from exorbitant tax rates.
Holding money out of the home country is an effective way for your asset protection.
You probably know about many scenarios of ex-pats who were suddenly blocked from taking money out of their accounts.
In many countries, the banking system has fairly feeble and unsound protection to account holders’ wealth and assets. This, consequently, can pose serious threats to businesses themselves.
Fortunately, an offshore bank account can make you feel secure as your asset is safe, especially when your foreign account is opened in such a highly transparent and regulated jurisdiction with a strong privacy law such as Swiss offshore banks.
Offshore bank accounts are strongly associated with convenient services. If you are not based in a single country but need to move around for business purposes, then an offshore bank account will be a good choice.
The reason for this is that offshore bank accounts are easily accessible from anywhere in the world. It provides account holders around-the-clock access regardless of you are living in any place or at any time zone.
Also, many reputable banks from sophisticated financial offshore hubs, Belize for example, do allow account holders to register their accounts remotely – no need to live near a branch of the bank.
Furthermore, offshore bank accounts ensure sufficient service utilities for account users as they can find in any local or international banks in their home country, such as customized services, 24/7 internet banking, debit/credit cards, ATMs networks, and many more.
The level of security is a pull factor for many offshore account holders.
Countries with uncertain and unfavorable economic climates, as well as frequent risks such as seizures, high inflation, bankruptcy, or any other financial risks, can lead to insecurity for your bank account.
Unlike accounts that you have opened in your home country, an offshore bank account, especially in a reputable and efficiently operated jurisdiction, will offer a high level of safety where your money can be well-protected against such cases.
Another benefit of offshore bank account is the privacy laws. In general, many offshore banking jurisdictions have enacted serval laws of strict corporate and banking confidentiality.
These highly put emphasis on anonymity for account holders, allowing accounts’ information to be kept safe and undisclosed.
Note that any behaviors violating the laws will be deemed criminal offenses and can lead to serious consequences of penalty, or even imprisonment unless there are enforcements from the relevant authority.
Higher interest rates
Generally, keeping money in offshore banks can offer higher interest rates on savings than that in your home country.
And one good way to obtain a good interest rate for your offshore bank account is to set up a long-term account.
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What makes “going offshore” accounts become distinct?
Well, currency diversification should be one of the highlights.
Offshore banking enables you to have a diverse currency portfolio in your offshore accounts. In other words, you can own different currencies in your accounts, as well as make transactions in multi-currencies.
As such, your account cannot easily be influenced by currency fluctuations which can often be seen in your home country.
A plus for offshore banking is that offshore financial centers have less government intervention. It means that account holders are able to access a wide variety of investment and funds opportunities.
Generally, you may find that several regulations do restrict the foreign investment possibilities of their residents.
By its flexibility, offshore accounts offer entrepreneurs and investors unlimited choices to reach international markets.
Keynotes for opening offshore bank accounts
Above all, one important note for anyone interested in offshore banking is that it is 100% legal.
There are certain misconceptions that linked this type to criminal behaviors, money laundering, and illegal tax evasion.
Notwithstanding, mention again taking advantage of offshore bank accounts is totally legal in most countries in the world.
By appropriately utilizing the benefits of offshore bank accounts, investors, SMEs, and startups with legitimate purposes can definitely make offshore banking become a powerful tool for their business growth.
What to conclude is that it is worth considering to open an offshore bank account. Still, it is in need to closely examine what your demand is and where you should open a new offshore bank account!
— Update: 10-02-2023 — cohaitungchi.com found an additional article 10 Reasons Why You Need an Offshore Bank Account Today from the website internationalman.com for the keyword benefits of offshore banking.
You may have wondered: “What can an offshore bank account give me that an account at Bank of America can’t?”
The answer is: A wide range of benefits you absolutely need.
An offshore (or foreign) bank account is simply a bank account you have outside of your country of residence.
Here are the top 10 reasons why you should open one now.
Reason #1: Dilute Your Political Risk
Today, the biggest threat to your savings isn’t market risk. It’s your own government.
There’s no doubt government poses an increasing risk to your savings. Governments are sinking hopelessly deeper into insolvency. Predictably, they are turning to the same desperate measures they’ve used throughout history.
It’s only prudent to expect more bail-ins (as we’ve seen in Cyprus), bank deposit taxes (as we’ve seen in Spain), retirement savings nationalizations (as we’ve seen in Poland, Hungary, Portugal, and Argentina), and capital controls (as we’ve seen in Cyprus and Iceland), among other destructive actions. And these are just a few recent examples.
If you think these kinds of things can’t happen in your country, think again.
According to Judge Andrew Napolitano:
…people who have more than $100,000 in the bank are targets for any government that’s looking for money to shore up its own inability to manage its finances.
A big part of any strategy to reduce your political risk is to place some of your savings outside of the immediate reach of thieving bureaucrats in your home country. Setting up a foreign bank account in the right jurisdiction is a convenient way to do just that.
That way your home government can’t easily confiscate, freeze, or devalue all of your money with a couple of taps on the keyboard. If your home government imposes capital controls, an offshore bank account would help ensure you could access your money when you need it most.
In short, keeping some of your savings in the right foreign bank can largely protect you from madness in your home country.
Reason #2: Sounder Banking Systems and Banks
Almost all of the banking systems in Western countries are fundamentally unsound. They’ve leveraged themselves to the hilt. The promises of insolvent governments are all that back them. Worse, most of these banks only keep a tiny bit of cash on hand to meet customer withdrawal requests. This means, in the event of another Lehman-style financial shock, you could have trouble accessing your money.
Many people put more thought into what reality show they are going to watch on TV tonight than which bank they choose to be custodians of their savings. Many don’t even realize they have other practical options.
There are banks in stable jurisdictions with low debt that don’t gamble with customer deposits (i.e. your money). Many of these banks are much better capitalized, keep more cash on hand, and are otherwise much more conservatively run than those in the U.S.
These offshore banks are almost always more responsible custodians of your hard earned savings.
Reason #3: Asset Protection
Maybe you think it’s just other people who live on the lawsuit firing line…and you live somewhere else. Think again.
The Legal Resource Network reports that 15 million lawsuits are filed in the U.S. every year.
That works out to a new lawsuit for one out of every 12 adults each year…year after year. Unless you’re exceptionally lucky, sooner or later your turn will come. You’re not going to like it.
It’s no fluke that 80% of the world’s lawyers, over 1.2 million of them, work in the U.S. That’s where the action is. Your money is the trophy they’re competing for.
While there is no such thing as 100% protection, a foreign bank account can help make you a less attractive target.
An offshore bank account also protects you from overzealous government agencies armed with the summary power to freeze your assets. That’s because their reach doesn’t extend beyond the U.S.
Read more 10 Reasons Why You Need an Offshore Bank Account Today
If you ever find yourself in a wrestling match with a government agency or a frivolous lawsuit, a foreign bank account give you resources you can count on.
Reason #4: Currency Diversification
Holding foreign currencies is a great way to diversify your portfolio risk, protect your purchasing power, and internationalize some of your savings.
Chances are, though, your domestic bank offers few, if any, options for holding foreign currencies.
Offshore banks, on the other hand, commonly offer convenient online platforms for holding foreign currencies.
Reason #5: Higher Interest Rates for Your Deposits
In what amounts to a war on savers, the European Central Bank and the Fed have manipulated interest rates to near historic lows. These artificially low interest rates effectively transfer wealth away from savers, who would otherwise enjoy higher returns on their deposits, to borrowers.
In fact, if you live in the West, there’s a good chance the interest you’re earning on your savings isn’t even keeping pace with the real rate of inflation.
If you look abroad, though, you can find banks that pay significantly higher interest rates than what you’d find at home.
Reason #6: Ensure Access to Medical Care Abroad
If you’re unable to receive timely treatment in your home country, an increasing possibility with the disastrous Obamacare, you may want to access medical care abroad.
In the worst-case scenario, this could mean the difference between life and death.
Suppose, for whatever reason, you cannot get the medical care you need in your home country and you have to go abroad. You would have to transfer money abroad to pay for it. However, if your home government has already imposed capital controls, it could be difficult or impossible to pay for the medical care you need.
This is where having a foreign bank account, which isn’t hostage to capital controls in your home country, can help ensure you can always pay for the medical care you need.
Reason #7: The Ability to Act Quickly
When it comes to international diversification, it’s always better to be a year early than a minute too late. Once a government has imposed capital controls or levied bank accounts, it’s too late to protect your money.
If you don’t already have one, you should open an offshore bank account now, even if it’s a small one. Just having one available, regardless of how much money you initially put in it, gives you meaningful benefits. It gives you the option to act quickly and transfer more money abroad in the future, should the situation warrant it.
Reason #8: Maintain Limited Privacy
Americans who have an aggregate of $10,000 or more in foreign financial accounts at any time during the year must report it. However, if the aggregate total of your foreign financial accounts remains under $10,000 for the year, and you are not using a trust, LLC, or other structure, you don’t necessarily have to report it. Always consult with your tax advisor on these matters.
Reason #9: Peace of Mind
An offshore bank account is like an insurance policy. It helps protect you from unsound banks and banking systems and the destructive actions of a bankrupt government. It also makes you a hard target for frivolous lawsuits and ensures you can pay for medical care abroad. Knowing that you’ve taken a big step to protect yourself should give you more peace of mind.
Reason #10: Maximize Your Personal Freedom
Having a foreign bank account gives you more options. More options means more freedom.
It’s a crucial step in freeing yourself from absolute dependence on any one country.
Achieve that freedom, and it becomes very difficult for any government to control your destiny.
Is Having an Offshore Bank Account Legal?
Despite what you may hear, offshore banking is completely legal. It’s not about tax evasion or other illegal activities. It’s simply about legally diversifying your political risk by putting your liquid savings in sound, well-capitalized institutions where they are treated best.
It’s no secret that it is becoming harder and harder to open a foreign bank account. Soon it could be impossible. This is a strong incentive to act sooner rather than later – even if you don’t plan to use the account immediately.
Even if your home government doesn’t slap on capital controls or confiscate deposits, you’re no worse off for having moved your savings to a safer home. In fact, you’re far better off for the reasons described above. Obtaining an offshore bank account is a prudent step that makes sense no matter what.
Offshore Banking Guide
Be sure to check out our comprehensive offshore banking guide where we share our favorite banks and offshore banking jurisdictions. It includes crucial information on the limited jurisdictions that still accept American clients and allow them to open accounts remotely with small minimums.
The New York Times best-selling author Doug Casey and his team describe how you can do it all from home. And there’s still time to get it done without extraordinary cost or effort, but you need to act quickly.
It’s an A-Z guide with information you won’t find anywhere else. And, for a limited time, we’re giving it away for free. Click here to download the PDF.