Print Article for : Open An Offshore Bank Account

Your Online Guide » Guide to Finance » How To Handle Finances

[O280]Open An Offshore Bank Account

by Philip K. Morrison, Phi

Offshore banking is a practice that refers to working / banking with a bank located in a foreign country. Offshore banks work like normal banks, the primary difference being that they are located in another country than the one where the account holder lives. However, certain offshore bank locations can offer significant tax benefits.

Usually, offshore banks run their businesses with lower overheads as they often don't have many branch locations and other complementary services. These banks pass on the savings thus resulting in savings to the account holders, in the form of various financial benefits. Some offshore banks even offer higher rates of interest on the deposits made.

With rules and laws of each country completely different it becomes apparent quickly that a few offshore jurisdictions stand out above the crowd over the others. They are able to do this by building a solid foundation of trust through tight bank secrecy laws, stable governments and layered investment vehicles.

A person or a company can interact with an offshore bank. Companies and indivdiuals alike can reap benefits from adding offshore assets to it's financial portfolio.

Beneficiaries of Offshore Banking

A lot of people can benefit from offshore banking, as it offers a good start in the form of greater flexibility, and increased privacy. People looking to save on taxes on their salaries and other income sources can benefit from offshore banking as well.

You could also use your offshore bank account to; to own or lease equipment in the foreign country, maintain subsidiary business office(s) in the offshore location.

Why go Offshore?

One can get help with managing the risks related to one's investment, help in managing a properly diversified investment portfolio, it can reduce one's tax burdens, it offers more personal privacy, it helps in conducting a business confidentially, thus proving to be secure.

Offshore banking locations where taxes are nil or low (tax havens) help acount holders to save on their own taxes, lower costs of operation, etc., help them to provide a secure banking solution to account holders.

If you now think that offshore banking can help you financially and with banking privacy, you're right; and it's probably the right time now for you to consult an offshore expert or seek his / her advice, to ensure that you are banking the right way.

All serious establishments will ask you to fill out forms known as KYC or know your customer. Find out more about KYC http://www.offshoreincorporation101.com/KYC.html This is not only to be able to give you better service but to protect themselves in case you are accused of money laundering. These forms also allow the bank to know your sources of income. Knowing your cash flow the bank will not ask you to prove the origin of the funds every time you make a transfer.

Even though you have filled out a KYC form the bank may or may not at its discretion allow you to start a relationship with them.

What's the difference between your local bank and an offshore bank? Basically any service you will get locally will be available offshore. Then why open an offshore account.

Offshore banking is no longer a handy way to conceal income from illegal activities or unreported business profits.

There are many justifiable monetary reasons to open an offshore bank account. As a resident in a country with an unstable political and economic history, you want your money in a safe place. The government could impose foreign exchange restrictions or there may be a bank run. A coup d'etat may make your money inaccessible.

Non-residents usually pay minimal or no taxes on interest or profits from investments. Depending on your citizenship, country of residence and if you use an offshore company as the account holder you may still have to pay taxes.

Many large international banks have branches or are incorporated in tax havens. To be on the safe side, you would probably be better off not using a bank that has branches or is incorporated in your country of residence.

American citizens must file an annual tax return no matter where they live and include offshore holdings. Starting July 1st, 2005, tax havens which are British ‘dependant territories', will apply the European Union's Saving Tax Directive of 2005. Initially this is 15% on returns of savings paid to nationals of EU Member States. Corporations are exempt from this withholding tax.

Always consult a tax specialist who has experience with the jurisdictions involved before starting your offshore tax journey. You do not want any costly surprises after you open offshore company and bank account.

Article Source : Pg. 275

About Author

Both Philip K. Morrison & David Jones are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.

Philip K. Morrison has sinced written about articles on various topics from Finances. Get out how to get started with &. Philip K. Morrison's top article generates over 590 views. to your Favourites.

David Jones has sinced written about articles on various topics from Family, Real Estate and Home Improvement. . David Jones's top article generates over 2900 views. to your Favourites.