The one thing that is certain in life is that things are going to change; what may have been easy one day, becomes difficult the next, this is certainly true with offshore banking. There are multiple factors to consider, some positive, other not so much, but each requiring a careful look at how they will affect your overall financial strategies.
With the war on terrorism and other political factors, “tax treaties” (and other legal agreements) were established between major nations with lesser nations following suit, sometimes willingly, often not. Based on that, it is now a fact that your offshore records can (and sometime are) disclosed to government agencies, often with little reason given. And while some nations (Switzerland and Panama) strive to maintain privacy and anonymity, it is now criminal for bank clerks to withhold any activity deemed “unusual”.
Don’t lose faith; enter the Offshore Trust, an interesting vehicle that allows some to enjoy the benefits, without the (current) negative aspects. An Offshore Trust is a legal agreement between you and the bank (called an IBC or International Business Company) stating the entity you created (and not you personally) will be the one that conducts business with the bank.
Are there benefits to establishing an Offshore Trust? There are many and each should be considered and weighed against the difficulties involved.
• Privacy (in most situations a strong level of privacy is ensured)
• Protection from excessive taxation
• Protection from litigation (the trust and not you would conduct business)
• Financial diversification
• OffShore trading accounts can be established
• Reduced (often nonexistent) estate taxes
• Tax free compound interest (this depends on which jurisdiction holds your IBC)
IBC DEFINED: An IBC or International Business Company is an entity incorporated in a country that looks favorably on local taxes usually assessing only a small annual fee, as opposed to a percentage of profits. The stipulation being that this entity would not conduct operations (business) in the country where it was established.
Anyone considering such an IBC, should of course consult their own tax attorney, there are legalities much too complex to adequately define here. In this, as in life, it is wise to measure the pros and cons in order to make a more informed decision.
Pros:
• Allows you to diversity investments
• Protect assets
• Personal freedom from much taxation
• Tax-free compound interest from earning
• The diversification of currency
• World-wide investment opportunities
• Protected estate planning
• Easy access to funds
Cons:
• If you are a US or UK citizen your government may believe you are hiding assets.
• If you investments are in smaller countries, political situations could change affecting your deposits.
• While funds are usually easily accessible via a debit card, should the card be lost, stolen or deactivated, obtaining a replacement could be troublesome.
• Being a foreigner, you may not be entitled to free checking
• The initial deposit may be fairly high
Offshore banking or investing isn’t for everyone, but it is for those who are seeking diversification and the ability to operate on the world stage.