Offshore banking where an individual has a bank account held offshore has established itself as a critical component of international finance. While once the mere mention invoked whispered conversations about tax evasion and money laundering, those days are in the past. Offshore banking is completely legal, in most cases backed by government entities, and a vital tool to help companies and individuals conduct business internationally.
WHO NEEDS AN OFFSHORE BANK?
- Expatriates
- World Travelers
- Businessmen with world-wide interests
- Selected businesses that incorporate offshore
- Individuals who desire banking privacy and flexibility
The Definition of Offshore Banking
Stated simply, it is simply the establishment of a bank account located outside the boundaries of the depositor’s home country.
OffShore Banking Statistics
Current estimates place half of the world’s capital in offshore banks. Statistically speaking tax havens control approximately 27% of the world’s capital, with Swiss banks holding (approximately) 35% of private and institutional funds. Based on reports by Merrill Lynch and Gemini Consulting (based on 2000 data), one third of the liquid assets of the world’s elite are held offshore. This translates to approximately $6 trillion dollars.
TAX HAVENS DEFINED: A tax haven is simply a geographical location that levies taxes at an attractive or nonexistent rate. The most ideal tax havens have privacy policies in places, the legalities of due process and a stable government.
Benefits of an Offshore Account
Attractive tax rates, distribution of wealth, exemption from taxes on gains, plus the fact multi-national corporations can meet their payroll with local currency is both smart and efficient. An offshore bank is a useful tool for the wealthy (and certain corporations) to protect (a portion) of their assets and enjoy the benefit of lower taxes, confidentiality and the opportunity to invest globally.
While certain privacy laws have been amended in recent years, the tradition of secrecy in Switzerland dates to the Middle Ages, made law in 1934, it is controlled by the Swiss Financial Market Supervisory Authority (FINMA). This law is strictly enforced and can be amended only by subpoena by a Swiss Judge.
FACT: Paypal (an eBay company) holds the records of one hundred million accounts spread throughout the world. In effect, every time you make a transaction with eBay or Paypal, you are delving (or at least exploring) the world of offshore banking.
FACT: The IRS estimates there are multiple millions of Americans using offshore bank accounts via a debit card, i.e. American Express, Master Card, or Visa.
Creating an Offshore Account
Today’s offshore banks are friendly, courteous and pleased to do business with you. It’s likely to be no different than opening a savings account locally. The services offered aren’t strange and mysterious; they simply make deposits, offer credit, wire money, etc. And unless you’re planning an unlawful activity, you are completely within your rights morally and legally to benefit from using an offshore bank.
What Can You Do With an Offshore Account?
- Diversify your investments
- Protect your assets
- Strengthen your financial positions
- Bank with privacy and flexibility
- Compound your earning tax-free
- Diversify which currency you use
- Easy access to funds
- Reduction of estate taxes
Whether you choose to use offshore banking is of course your decision, but it may offer peace-of-mind along with diversification.