Offshore banks: Offering Low Tax Services With Confidentiality
offshore banks
Offshore banks are becoming increasingly maligned as they fight to protect your wealth from the prying eyes of aggressive governments.
Watch my playlist of videos on how an offshore company with a bank account helps you grow and protect your wealth. Click on the arrows on either side of the screen to see a small previews of each available video:
An off shore bank is generally in a country with low or no government levies on income, wealth or death, and which provides financial and legal advantages. These advantages typically include:
* greater privacy, a principle born with the 1934 Swiss Banking Act
* protection against local political or financial instability
While the term originates from the Channel Islands as "offshore" from Britain, and most of them are located in island nations to this day, the term is used figuratively to refer to such banks regardless of location e.g. Switzerland, Luxembourg and Andorra in particular are landlocked.
Offshore banking has often been accused of helping the underground economy and organized crime, via tax evasion and money laundering; however, legally, offshore banking does not prevent assets from being subject to personal income tax on interest.
Except for certain persons who meet fairly complex requirements, the personal income tax of many countries makes no distinction between interest earned in local banks and those earned abroad. Persons subject to US income tax, for example, are required to declare on penalty of perjury, any offshore bank accounts which they may have.
Following September 11, 2001, there have been many calls for more regulation on international finance, in particular concerning tax havens and their banks, and clearing houses.
Defenders of off.shore banking have criticized these attempts at regulation. They claim the process is prompted, not by security and financial concerns, but by the desire of domestic banks and tax agencies to access the money held in offshore accounts.
They cite the fact that offshore banking offers a competitive threat to the banking and taxation systems in developed countries, suggesting that Organization for Economic Co-operation and Development (OECD) countries are trying to stamp out competition.
Advantages of offshore banking
* Such entities provide access to politically and economically stable jurisdictions. This may be an advantage for those resident in areas where there is a risk of political turmoil who fear their assets may be frozen, seized or disappear. However, developed countries with regulated banking systems offer the same advantages in terms of stability but not of taxation.
* Some of them may operate with a lower cost base and can provide higher interest rates than the legal rate in the home country due to lower overheads and a lack of government intervention. Advocates of offshore banking often rightly characterize government regulation as a form of tax on domestic banks, reducing interest rates on deposits.
* Offshore finance is one of the few industries, along with tourism, in which geographically remote island nations can competitively engage. It helps developing countries source investment and create growth in their economies, and can help redistribute world finance from the developed to the developing world.
* Interest is generally paid by them without tax deducted. This is an advantage to individuals who do not pay tax on worldwide income, or who do not pay tax until the tax return is agreed, or who feel that they can illegally evade tax by hiding the interest income.
* Some offer banking services that may not be available from domestic banks such as anonymous bank accounts, higher or lower rate loans based on risk and investment opportunities not available elsewhere.
* Offshore banking is often linked to other structures, such as offshore companies, trusts or foundations, which may have specific tax advantages for some individuals.
* Many advocates of off.shore banking also assert that the creation of tax and banking competition is an advantage of the industry, arguing that tax competition allows people to choose an appropriate balance of services and taxes.
Disadvantages of offshore banking
* Offshore banking has been associated in the past with the underground economy and organized crime, through money laundering.
* Following September 11, 2001, tax havens and their banks, along with clearing houses, have been accused of helping various organized crime gangs, terrorist groups, and other state or non-state actors. However, offshore banking is a legitimate financial exercise undertaken by many expatriate and international workers.
* Offshore jurisdictions are often remote, so physical access and access to information can be difficult. Yet in a world with global telecommunications this is rarely a problem for customers. Accounts can be set up online, by phone or by mail.
* Offshore private banking is usually more beneficial to those on higher incomes, because of the costs of establishing and maintaining offshore accounts. However, simple savings accounts can be opened by anyone and maintained with scale fees equivalent to their onshore counterparts. The tax burden in developed countries thus falls disproportionately on middle-income groups.
Historically, tax cuts have tended to result in a higher proportion of the tax take being paid by high-income groups, as previously sheltered income is brought back into the mainstream economy.
Banking services
It is possible to obtain the full spectrum of financial services from these banks, including:
Not every bank provides each service. Banks tend to specialize between retail services and private banking services. Retail services tend to be low cost and undifferentiated, whereas private banking services tend to bring a personalized suite of services to the client.
*Following September 11, 2001, there have been a number of initiatives to increase the transparency of offshore banking. A few examples of these are:
* The tightening of anti-money laundering regulations in many countries including most popular offshore banking locations means that bankers are required, by good faith, to report suspicion of money laundering to the local police authority, regardless of banking secrecy rules. There is more international co-operation between police authorities much to the tax haven's dismay.
* Following 9/11 the US introduced the USA PATRIOT Act, which authorizes the US authorities to seize the assets of a bank, where it is believed that the bank holds assets for a suspected criminal. Similar measures have been introduced in some other countries.
* The European Union has introduced sharing of information between certain jurisdictions, and enforced this in respect of certain controlled centers, such as the UK Offshore Islands, so that tax information is able to be shared in respect of interest.
Offshore financial centers
In terms of off.shore banking centers, in terms of total deposits, the global market is dominated by two key jurisdictions: Switzerland and the Cayman Islands, although numerous other offshore jurisdictions also provide offshore banking to a greater or lesser degree. In particular, Jersey, Guernsey and the Isle of Man are known for their well regulated banking infrastructure.
Some offshore jurisdictions have steered their financial sectors away from offshore banking, as difficult to properly regulate and liable to give rise to financial scandal.
Typical banks in different jurisdictions
1. Barclays Bank PLC
Bank description: Renowned international bank, global presence
Type of usage: Regular trading / accumulation / asset holding / investment
Minimum balance: USD 2,500 or equivalent
Remote operation: Internet banking to be introduced shortly.
Operational costs: Average (wire transfer charges 0.15%, min $20 - max $65)
Opening procedure: By mail, via approved intermediary
Due diligence: Detailed due diligence on all principals and signatories
Restrictions on signatories: None
2. Standard Bank, Isle of Man
Type of account: corporate account / personal account
Type of usage: Accumulation / savings / asset holding / investment. Active trading operations discouraged
Minimum balance: EURO 10’000 or equivalent
Remote operation: Internet banking / facsimile
Operational costs: Average (outgoing wire transfer charges $50)
Opening procedure: By mail, via approved intermediary
Due diligence: Detailed due diligence on all principals and signatories
3. Anlage & Privat Bank AG, Switzerland
Type of account: corporate account
Type of usage: Accumulation / asset holding / investmentActive trading operations possible, but not recommended
Minimum balance: EURO 25’000 or equivalent
Remote operation: Facsimile
Operational costs: High
Opening procedure: By personal presence in bank or with banks’ representative in Switzerland or Latvia
Due diligence: Detailed due diligence on all principals and signatories
4. Anglo Irish Bank Austria AG, Austria
Type of account: corporate account
Type of usage: Accumulation / savings / asset holding / investment. Regular trading possible, but discouraged
Minimum balance: EURO 25’000 or equivalent
Remote operation: Facsimile
Operational costs: Above average
Opening procedure: By mail, via approved intermediary
Due diligence: Detailed due diligence on all principals and signatories
An offshore company acts as a buffer between you and the bank account and is advisable, instead of having a bank account in your own name.
Offshore Technology, Banking And Freedom With The Universe. Discover The Classic PT (Perpetual Tourist) EBooks. Be A PT (virtually, If You Like) And Live Your Life The Sovereign Individual Way. Includes Portable Trades And Occupations, Passport Report And Invisible Investor Plus Bonuses. Start Living Free Now!
Retire Early - Off shore Investments, Banking & Money. The author says: "I Retired At 43 With The Standard 401k, Annuity And Some Stock From A Corporation. Then I Found Out Where I Could Make Some Real Money And Went Back To Work. Now I Am Retired And Working! Life Could Not Get Better!"
Search this site via the Google designed box for the topic of your choice. We have more than 95,000 words to choose from, in 125 pages of video, text and images.
Do you still own your wealth personally? Or in the name of friends and family? Or do you keep it in cash, just to be safe?
Your privacy is important to us. Your e-mail address will not be used except to answer your question and send you product updates only if you chose to receive them. Under no circumstances will we sell, rent, or give your e-mail address to anyone, at anytime.
Fill out the form above for more information about your own offshore company and an offshore bank account.
Search this site via the Google designed box for the topic of your choice. We have more than 95,000 words to choose from, in 110 pages of video, text and images.