Offshore banking is the facility that affords transfer of some or all of the money out of ones’ bank or credit union to anywhere in the world. An offshore bank is located outside the resident country in which the depositor resides. Usually offshore banks flourish in typically low tax jurisdictions which are a tax haven for depositors apart from other financial and legal benefits to the holder of the account.
Offshore banking account
The term offshore originally referred to 'Channel Islands’ namely Jersey, Guernsey and others which are physically located at a distance from mainland Britain and which enjoy a tax haven status. Later the term 'offshore’ came to be used figuratively to all such banks that are tax havens regardless of their location. Interestingly most of the offshore banks are located in island nations except for Switzerland, Luxembourg and Anorra which in particular are landlocked.
An offshore bank account is one held in a bank located outside the country of one’s residence. Some of the offshore financial centers include Bahamas, Barbados, Bermuda, Channel Islands, Hongkong, Labuan Malaysia, Luxembourg, Isle of Man, Cook Islands, Mauritius, Panama, Saint Kitts and Nevis, Seychelles, Singapore and Switzerland.
Opening an account with an offshore bank is very simple. Most offshore banks never have to see the account holder in person. All one has to do is write a formal letter to an institution offering offshore facilities for request of information about its various services and appropriate application forms.
Although offshore banks are regulated in one form or the other, their regulations are usually less restrictive than that one prevailing in US or UK. Lesser restrictive regulation abroad is the important lure for potential investors. Offshore banking provides the customer / depositor with tremendous financial and legal advantages. Offshore banking also offers the customer strong privacy and bank secrecy for privileged customers.
There are many negative associations and connotations related with offshore banking including that it caters to underground economy and organized crime and helps money laundering. A fact that needs to be understood here is that although offshore banks may not be obligated legally to disclose the transaction details of its customers as it is protected by the 'bank secrecy’, this anyway does not make the non declaration of the income by the tax payer or evasion of the tax on that income legal. Simply put, legally no offshore bank prevents the assets from being subject to personal income tax or interest. Offshore banking if normally preferred by:
The ability to conduct international transactions is a definite advantage of offshore banking. A facility that provides the ability to receive and move money around the world is what is needed by most global trotters who constantly have homes and financial commitments in many parts of the globe. An offshore bank allows its account holder to transact in multiple currencies. For instance, a flexible offshore account enables the international consultant to charge and receive payments in a currency different from his/her resident country.
Offshore banking services