Explore the world of offshore banking with International Wealth. Learn about the benefits and misconceptions, find out why expats often opt for offshore accounts, and discover the potential drawbacks. Book a session with our experts for personalized guidance on offshore banking.
Offshore banking remains a popular choice for individuals and legal entities. Anyway, it is always safer to have at least two bank accounts in case one of them is frozen! What is more, offshore destinations usually offer low tax rates, which means that you can keep the main amount (or your savings) there to hold, invest, or receive interest on it. Expats often need two accounts as they may have to return to their country of origin for some reasons – or support, for example, their parents or children who are still there. Let’s look at the banking landscape to identify the best choices.
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Offshore Banking: Overview
An offshore bank is in fact any foreign bank that provides services to non-residents, and it is not always located on a beautiful island. Wealthy people choose to entrust their capital to foreign banks that offer lower tax rates and more confidentiality for account owners – and these are the primary reasons why they take all the hassle of setting up an account in a different jurisdiction than their homeland.
There are two myths that we will dispel:
- Opening an offshore account is illegal. An account is just an instrument, and it remains perfectly lawful until you start taking illegal action with its help. One more important nuance is that some countries require their citizens and tax residents to declare that they possess assets abroad, including an account. And if you conceal this fact (intentionally or unintentionally), this will be considered an offense. However, it does not mean that the account itself is in any way illegal!
- Offshore banking is for the wealthy. In reality, you can start an offshore bank account with just a few hundred dollars in your pocket. Middle-class people do that to have an account for pension savings and gradually replenish it. It ensures reliable protection: if the assets in your home country are seized for some reason, you will not remain without any money at all.
Who Needs an Offshore Bank Account
There are multiple reasons why people find having several bank accounts more convenient than sticking to one:
- They seek higher interest rates and better banking services than those offered by their current bank
- The home country is politically or economically unstable or imposes strict currency control
- They often travel, or they are expats/digital nomads: this means that they need to manage their money from anywhere in the world
- International business requires dealing with payments in different jurisdictions
- They need enhanced confidentiality that they cannot have in their home country
- Investments in assets abroad (like real estate), cryptocurrencies, or securities, which is not possible in their home country
- Tax optimization plans
Offshore banking is an excellent choice if you opt for a reliable jurisdiction and bank – and our experts will help you find them! Contact us now for more information.
Offshore Banking: Benefits for Expats
Expats are recommended to open a multi-currency bank account that will help them pay the bills in different countries or make investments in any jurisdiction.
An offshore account will help expats:
- Neutralize the influence of high inflation
- Protect their funds from currency devaluation
- Mitigate the risks connected with an unstable situation in their home country
Keeping money in an offshore bank will also help an expat benefit from the territorial taxation system, which means that they pay taxes on the income at the place where they earned it (and not in the country of their residence).
Living in different countries may also mean different time zones. However, present-day offshore banks offer convenient transaction management via secure online platforms and mobile apps, so you will be able to manage your operations on a 24/7 basis regardless of the time zone you are in.
Inheritance taxes could be very high in different countries. However, you can minimize them by taking care of your inheritance in advance: set up an offshore bank account and combine it with a trust to enjoy a low inheritance tax, protect your assets in the most reliable manner, and manage your wealth in a better way than an ordinary will allows you to do.
If you choose an offshore bank as the main stronghold where your funds will be kept, you will have a dedicated personal client manager. This service is especially appreciated by expats who value a customized approach to their personal finances.
Offshore Banking: Drawbacks for Expats
Our overview would not be complete without mentioning the drawbacks!
- The term “offshore” may still be associated with money laundering, tax evasion, and other similar activities. Never discuss your offshore activities with people if you feel that your reputation may be damaged – or refer to them as “foreign banking operations”.
- Some offshore jurisdictions do not have a high reputation, either. However, our experts will choose a destination that has a good image in the eyes of most people.
- If you choose any offshore bank you see first, you may run a risk of cooperating with an unreliable institution that will charge higher commissions and provide less convenient services than you are used to back home. However, this can be avoided: our experts choose the banks with a proven track record and collect feedback from customers to offer the best banking to you. Simply contact us to know more and make a well-informed choice.
Want to know more about the advantages and disadvantages of offshore bank accounts? Click on the above link to discover more – or book a session with our expert!