Offshore banking has now become an important segment of the international financial system. Offshore banking is simply a practice of working with an offshore bank. An offshore bank refers to a bank located outside the country where the depositor lives.
Usually, these banks may be located in such a jurisdiction with substantial financial as well as legal advantages. Offshore banks provide a continuum of services in connection with financial management, such as, deposit taking, money transmissions, creation of provision of foreign exchange, trade finance, credit facilities, investment and fund management, corporate administration, and trustee services.
Creation of a bank account with an offshore bank is great alternative particularly for those who have to travel frequently or someone whose career changes a lot. People prefer offshore banking for a myriad of other purposes such as expansion of your business, tax-free investment, anonymity with regard to financial matters, asset protection, and estate planning.
A specialty of offshore banking is that an account can be opened with an offshore bank simply as a saving account. Account can also be opened to carry out main business functions. Apart from these, through an offshore bank, you can even make investments and take loans.
This type of banking has now been legally used by many individuals and corporations worldwide. Offshore banking is usually preferred by people falling under three categories, such as, high net worth individuals, expatriates, and business owners. High net worth individuals are usually people with a non-refundable income in excess of one million US dollars. Included in the expatriates are people residing oversees away from their country for employment purposes or any other reasons.
Business owners are usually those people who own business and whose shares are owned by family members or any other close people. Nowadays, many of the corporate clients including multi national corporations, large industrial as well as trading companies, shipping companies, and banking corporations, are also getting attracted to the benefits offered by offshore banking.
One of the prime benefits of offshore banking is that it provides access to economically as well as politically stable jurisdictions. This proves to be advantageous to such people whose residing area has risks of political disorders. There are certain offshore banks that function with low cost base, which in turn can offer higher interest rates to the depositors when compared to their home country.
Another great benefit is that it is a great way for developing countries to enhance their economic growth, since offshore banking allows to redistribute finance from the developed economies to the developing economies. Perhaps the most prominent of the offshore banking is tax benefits, ie, most of the offshore banks makes payment of interest without deducting the tax.
This is highly beneficial to individuals who do not make tax payment on worldwide income or who do not make payment until the tax return is agreed. Further, many of the services rendered by the offered by offshore banks many not be available from banks located in home country.
Offshore banking is usually associated with formations including offshore trusts, offshore foundations, and offshore companies, which in turn may provide some kind of benefits in the form of tax as well as asset protection. As a healthy competition is seen in the industry of offshore banking regarding tax benefits, it enables to choose the most appropriate facility offering tax advantages. In addition, offshore banking allows you to easily move your assets, if you want to join an employment or spend long periods outside your home country.
Other significant benefits of offshore banking are:
- Since it provides a broad range of features, offshore banking can provide you absolute safety and security
- As offshore banks are mostly located in a jurisdiction with sound economic and political condition, it provides stability
- Many of the offshore banking facilities assure privacy and confidentialty
- Above all, offshore banking system provides flexibility, ie, it provides flexible structure to business owners and expatriates requiring global access to their fund
In order to acquire the full benefits above mentioned, it is recommended to review or examine your decision of opening an account with an offshore bank. Primarily, it must be checked whether the offshore bank you have chosen is located in such a jurisdiction that can meet your requirements. The next to be considered is that whether the chosen offshore bank renders all the services it mentions.
Despite any challenge, setting up an offshore bank account is considered a wise decision.