Offshore banking has been often associated with the underground economy and organized crime, via tax evasion and money laundering. Did you ever ask yourself what is the difference between the usual bank account in your country and an offshore bank account?
Let’s proceed further by explaining what offshore is. The term originates from the Channel Islands “offshore” from United Kingdom. That’s why most offshore banks are located in island nations to this day. However, the term is used figuratively to refer to such banks regardless of location. Most people feel suspicious when thinking about this kind of bank accounts. Why? The money that goes into offshore banking has some kind of “dirty money” reputation. However, this isn’t a proved fact. People watch too much TV lately. An offshore bank provides financial and legal advantages. Discover what an offshore bank account really is. Here are some facts you should know:
1. Greater privacy for your wealth
Most of the offshore banks keep in absolute privacy all the information about your money. Bank secrecy is a legal principle under which banks are allowed to protect personal information about their customers. Effective bank secrecy is better achieved in certain countries, such as Switzerland, Luxembourg and Andorra for example.
2. Less restrictive legal regulation
Usually, offshore banks accounts apply “softer” law towards their clients. Regulation can be considered as legal restrictions promulgated by the banking authority. In such a way, people find a reasonable attitude towards having offshore bank accounts. They don’t need to pay attention to most of the formalities they do in their country of residence.
3. Very low, or no taxation at all
It is well known that this kind of banks use the tax haven principle. Most of the offshore banks have very low tax rates, while some of them don’t apply a tax at all. Individuals or companies can find it attractive and move themselves to areas with lower tax rates. This creates a situation of tax competition among governments.
4. Easy and simple access to deposits
A deposit account is a current account at a banking institution that allows money to be deposited and withdrawn by the account holder. The main difference between a deposit account in a national bank and an offshore bank is that (at least in terms of regulation) offshore banks allow you to have easier access to your money. Once again, this is another attractive feature for those interested in protecting their wealth.
5. Stable protection against any political or financial instability
Most of the banks in big countries are directly concerned when dealing with financial instability. On the other hand, many smaller countries can provide offshore bank services without being substantially affected by the changes in economy on a world wide scale.
There is still a myth attached to offshore banks because of some underground financial dealings, but there is nothing illegal about opening one for good legitimate reasons. Still, banks may ask a substantial initial deposit or other restrictions, but the benefits of a lower tax obligation or higher interest rate usually have higher priority.