One doesn’t have to be a billionaire to open an offshore account. Neither opening an offshore account is illegal. The myths surrounding an offshore account are aplenty and here we will furnish the how’s, where’s, what’s and why’s related to it.
What is an offshore account?
The simplest definition of the term ‘offshore account’ is that it be can opened in a bank which is located outside the country of the individual’s [read: depositor] residence. Essentially, offshore banks provide great financial and legal assistance. Moreover, they are located either in low tax jurisdiction or are completely situated in tax havens. In addition, the confidentiality of the account holder is vastly protected.
Offshore banking is often considered as an organized crime to evade taxes and to launder money. However, legally speaking, it does not inhibit assets from being subject to personal income tax on interest.
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Popular offshore banks
When it comes to opening an offshore bank account, the question arises which bank is the best? Well, there are number of options as each bank has its own distinguish trait.
Offshore investors often talk about the following countries to open an offshore bank account. They are best at:
- Cayman Islands (minimal tax liability)
- Singapore (well-protected)
- Switzerland (asset protection)
- Nevis (ideal for offshore companies)
- Germany (safe and secure)
These aforementioned banks are good what they are best at. Therefore, it is up to the investor to open an offshore account keeping in mind the need.
Procedure of opening an offshore account
The notion of opening an offshore bank account is a bit complex. However, it is not difficult. According to Investopedia, an offshore investor should be prepared with the following items before opening an account:
- Valid passport or driver’s license
- Residential proof
- Documents to prove your identity (required in some cases)
- Bank statements (to assess financial stability)
- Documents about the source of funds for your offshore account (investment statements)
- Currency choice (USD, EUR or any other)
More often than not, offshore bank accounts are operated electronically via global wire transfers. There’s a certain transfer fee which is levied upon sending and receiving funds. However, the fee varies from bank to bank.
Most of the offshore banks also provide a debit/ATM card which empowers the account holder to access the funds internationally. Again, there will be some fee which differs. Some of the banks hesitate in offering checks as it could essentially compromise the confidentiality of the account holder.
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Why do people opt for offshore accounts?
It depends entirely on an individual as to why s/he is interested in opening an offshore account. Nonetheless, some of the benefits of having an account are as under:
- Greater political stability
- Protection of assets
- Responsible and sounder banking systems
- Diversified currency
- Financial security
- Enhanced medical care
- Tax benefits
- Accessibility of account from anywhere
- Less or no government intervention
- Personal freedom is exercised
The downside of offshore banking is that it is slightly riskier than onshore banking. In addition, an individual must select the jurisdiction after thorough research. Furthermore, the term ‘offshore’ has become synonymous to illegal and immoral money laundering. Though offshore banking is totally legitimate, the tag of ‘offshore’ definitely raises many eyebrows. Besides, the transfer and withdrawal fees are a lot higher.
Offshore banking is completely legal. Additionally, an account can be opened easily if all the paperwork is done. Likewise, if you can demonstrate that the account is not being opened for an illegal activity then you would be able to take total advantages from the services offshore banking offers.