Offshore Banking – Top 5 Facts
Whether using the term offshore
banking, international banking or foreign banking, the practice of banking in a
jurisdiction outside an individuals, or company’s, place of residence is still
a popular strategy. Globalisation and competitiveness between jurisdictions to
attract foreign investment means there are fewer barriers to investing in other
countries, including setting up and offshore company or opening an offshore
bank account. Due to bad press and general misconceptions about offshore banking there are a few myths about setting up bank accounts in
foreign markets. However, entrepreneurs looking to expand their business to
international markets can enjoy a number of benefits from this strategy.
The benefits gained from international banking strategies are usually focused on taxation and this is certainly a major attraction but not the only one. Offshore bank accounts can also provide operational efficiencies, increase security of assets and provide access to international business opportunities. Following are 5 facts about offshore banking to give some insight into potential benefits.
· Offshore banking is legal – Provided you follow the correct procedures of the jurisdiction in which you are setting up a bank account and you meet the legal obligations of your residential jurisdiction. Different jurisdictions will have different requirements in terms of required due diligence but an experienced corporate service provider can guide you through this process.
· The legitimate purpose of offshore banking is not to evade tax – As mentioned, there are a number of benefits of international banking strategies. Legal tax planning and protection of financial assets are two of these.
· Offshore banking is not totally tax-exempt – while many of the traditional banking jurisdictions do not charge account holders tax on their deposits, some countries do charge withholding taxes on the income earned from accounts held by foreign individuals and companies. It is also crucial to remember that some countries, such as the US, tax worldwide income.
· Offshore banking can be undertaken in thriving developed countries – the view of setting up a bank account in a small tropical island is common and there are many small jurisdictions that are attractive for foreign investors. However, there are many options including some of the most technologically advanced jurisdictions in the world, such as Singapore and Hong Kong. Offshore accounts can still enjoy all the benefits of a local bank account including multi-currency accounts, electronic transfer, cards etc.
· It is not always necessary to travel to the jurisdiction to open an offshore account – This does depend on the offshore banking jurisdiction but working with an experience corporate service provider can aid in completing the bank account opening process with minimal inconvenience.
An offshore bank account is not that much different from a domestic account. As more and more people, and companies, participate in international business, banking in foreign markets will also continue to expand. Offshore banking is a strategy that can legitimately improve investment efficiency and overall financial position. Due to focused attention from governments fighting tax evasion, offshore banking strategies should be researched and planned to ensure all legal requirements are met.