Offshore banking is basically referred to the institutions which are regulated by specialized laws and these laws grant the freedom in operations and offers favorable tax treatment. These institutions basically aim to take investments from the nonresident individuals and organizations and country citizens don?t have access to the services offered by offshore banking. You need to keep in mind that all the banks which are located in tax heavens are not offshore banks. Some of the offshore banks also coexist with the onshore banks and they do not benefit from specified legislations.
Advantages of Offshore Banking
Offshore banking offer large number of benefits. Some of them are:
- It offers high level of freedom due to the less intervention from the government side and exemption from compliance with the regulations on capitals like investment policy, foreign transactions and exchange controls. Reduction of costs allow payment of high interest rates.
- Deposits as well as leads in offshore banking are free of tax so you get lower taxes indeed.
- Offshore banking ensures increased privacy due to their establishment in the areas which have strict laws and secrecy.
- Offshore banking offers monetary and political stability due to their presence in major financial centers
- Many offshore banks offer special services which are not available at the onshore competitors like yield results of the investments, anonymous credit cards and numbered accounts.
Disadvantages of Offshore Banking
Offshore banking has many disadvantages along with the benefits which it offer. Some disadvantages are:
- Offshore banks are usually mistrusted by the financial institutions and authorities. Sometimes these banks are related to the money laundering and tax evasion and that is the reason transactions of these banks usually have to face alerts and notifications from tax inspection authorities.
- Many offshore banks don?t offer any kind of deposit insurance.
- Maintenance costs of an offshore account are more than a traditional one.
- All the banks including offshore and onshore banks demand proof and documentation. Few banks get settled with information on the account application
Performa but few banks demand additional documentation to prove money origin especially if the deposited amount is significantly of high value. All the information provided to the offshore banks is kept protected and private according to the banking secrecy options.
If you want to opt for the offshore banking then you need to keep in mind that it offer many opportunities and advantages for investors but at the same time you also have to keep the risks associated with offshore banking in mind. You need to make sure that you get complete knowledge about the offshore banking if you want to go for it. It is important to select jurisdiction carefully for opening an account and choose the offshore banking institution which offer guaranty of the privacy, solvency and security and if you are satisfied that the bank is safe to deposit your hard earned money then you need to go for it and enjoy the true benefits of offshore banking at its best without any inconvenience.
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Last edited: May 29, 2016
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Disclaimer: Nothing I say should be taken as tax, legal or financial advice. Anything I say is for general informational purposes only. Always seek independent professional advice.
