Offshore Banking

Many people do not fully undestand exactly what an offshore bank is and why people and businesses would elect to use one. This article will provides a basic explanation of offshore and international banks, their services and the benefits and risks of using such institutions.

What is an offshore bank?

An offshore bank offers various financial services to individuals that wish to deposit money outside of the country in which they reside.

What are the benefits of offshore banking for expats?

There are a great number of reasons why individuals or corporations end up banking offshore. Most of these advantages, obviously, involve financial and legal benefits not available where a depositor is from or currently resides. Importantly, offshore banks generally offer the benefit of choosing a currency.

People that wish to decrease their tax liability or those that live in politically unstable areas often explore their options with offshore banking service providers.

Also, those that live abroad often want to have the flexibility that offshore banking provides them. In short, it simply adds convenience for those that live an international lifestyle, such as expats, who want to carefully manage their financial affairs.

Where are Offshore Banks Located?

All over the world. Some of the more high profile locations include the Bahamas, Switzerland, Hong Kong, the Channel Islands (Jersey and Guernsey), Isle of Man, Panama, Austria, Belize and the Cayman Islands, among many others.

Do offshore banks offer tax advantages?

This depends on a number of different factors. Most importantly, whatever country you are from has tax laws that each of its citizens must follow. This includes self-reporting of the existence of offshore accounts AND any income generated regardless of where it is located in the world.

Are there risks to using offshore banks?

Just as with any other financial service providers, there are risks to using offshore banks. For example, offshore bank accounts may not have the type of insurance you'll find in your home country. For example, in the United States the FDIC protects depositors up to specific amounts in some types of bank accounts. The United States does not offer this protection to offshore accounts.

What are the best first steps to find out if offshore banking is right for me?

Contact offshore banking and financial services providers to find out the specifics of what they can provide to you. Careful management of your finances is one of the most important commitments all expat should make for themselves and their families. That means research! What are the advantages? What are the risks? Every company and country present both - what are they?

Are Offshore Banks Legal?

Offshore banks are legal unless you are trying to evade taxation or use the account for other illicit purposes. Again, many governments, such as the U.S., hold their citizens responsible to report the existence of all foreign accounts and all income regardless of where it was earned (foreign or domestic).

The best way to proceed with exploring the idea of offshore banking is to consult the service providers you are considering, and then get the advice of your accountant, or another one with experience in offshore banking, to ensure you gain all the benefits available without running afoul of tax laws.