Many people around the world make the decision to do their banking offshore. For most of us though the only time we hear the words ‘offshore account' is when we're watching a movie involving gangsters and conmen. So what exactly is an offshore account and why do people choose them over a regular bank?
The Definition
An offshore account is simply a bank account you set up in a country outside of where you live. This means the government of the country in which you live has no jurisdiction over your financial transactions. There are advantages to this and disadvantages, depending on which country you choose for your international account.
Advantages
• There can be substantial tax breaks and higher investment opportunities for offshore accounts. Many offshore accounts are tax havens, which translates into savings for the depositor. While you still have to declare all income from worldwide investments in the US, you may gain from gross income interest payments and other tax liability perks. A lot of offshore accounts can also provide higher interest rates than your home country resulting in greater growth of your current portfolio.
• Unknown to many US citizens is the fact that there are high performing funds around the world that residents of the US cannot legally profit from. If you have an offshore account, however, you can gain access legally to these ‘hidden' investments.
• For many offshore accounts you can do multi currency transactions without paying the higher fees of domestic accounts and can write cheques or complete transactions in any country in the world.
• Some offshore banks allow anonymous bank accounts and lower or higher rate loans.
• The government of your home country does not have jurisdiction over your offshore account. This means they cannot freeze your assets or seize the money for any reason. (This is one of the main reasons why illegal activities are generally associated with offshore banking. You can still be charged with and jailed for tax evasion in the US but the government cannot touch your money.)
Asset protection is a major reason for offshore banking.
• Extremely high levels of confidentiality and security exist with offshore accounts. This guarantees privacy in all your financial dealings.
Disadvantages
• US banking insurance policies do not cover offshore accounts and few offshore accounts offer compensation schemes. This means if the country or bank you have invested your money in collapses because of a political or economic crisis your money may disappear with it.
• It is more complicated to set up your offshore bank account as there are many variables depending on the country you choose. The minimum fees and deposits required in some countries for offshore accounts make them financially out of reach for the average citizen.
• Offshore accounts have been tied to money laundering and all types of criminal activities. This can affect your business reputation.
As with all financial dealings there are advantages and disadvantages to moving your money offshore. The most important thing when it comes to offshore banking is to ensure you use a reputable company that has expertise in international banking and tax laws when you first set up your account. These trusted financial companies will look at your portfolio and assess the risk versus profit margin of the varying countries offering you offshore accounts.
Each country comes with its own set of tax laws and levels of security. There are also a myriad of different account types and investments depending on what your financial goals are.
Offshore banking is definitely an area to entrust to the experts.
LOM Offshore Financial Services http://www.lom.com offers tax efficient offshore investments with access to tax free bonds, preferred shares and dividend income
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