Prior to understanding the reasons for using an offshore bank account, you must learn more about offshore banking.
An offshore bank account is one that’s located beyond the country in which the depositor resides. All offshore banks are headquartered in Switzerland; this fact leads to the idea that the offshore banks aren't actually “offshore”. The Channel Islands in the UK have banks that first started offering offshore financial and banking services in their own unique way.
Maintaining your account with an offshore bank may yield the following advantages -
- In a sharp contrast with the depositor’s home country, deposits made with offshore banks may show a much higher rate of interest.
- The rate of tax in the homeland of the account holder might just be higher than another nation wherein his offshore bank is located.
- Unlike most countries of the world, offshore banks meet interests that aren’t taxed at source.
- In comparison with banks operating within the homeland of the borrower, offshore banks make loans at much lower interest rates.
- Captive offshore banks and their branches within the US and abroad may serve foreign borrowers with business loans.
- Banks located within the homeland of the depositor may not be able to provide him with anonymous accounts and other financial privacy as offered by offshore banks.
- Safeguards the depositors interest from political unrest within his homeland.
- Yields more of financial and commercial stability than what the depositor gets within his home country.
- Home country of the depositor may not offer similar flexibility as that of the account structure of an advanced banking system.
- Home country of the depositor may have a different time zone than that of a bank that provides him with funds. This is a great advantage for businessmen.
- Offshore foundations, trusts, companies and various entities utilize the facets of offshore banking. Certain tax advantages are also enjoyed by the account holder in this regard.
- Various global organizations like NGOs and aid agencies have their team of travelers, expats, international employees and workers that use offshore accounts.
- For the purposes of corporate financial structuring, the overall business process of a company gets attached with individual entities that the company owns and that are connected with the losses and gains of the process. Transfer pricing may be a good instance of such purposes.
- Worldwide cash management is a corporate financial requirement.
Some of you tend to believe that the homeland of the account holder may consider income taxes to be exempted for different forms of incomes like dividends, profits, capital gains and interests. However, this is a common misconception with individuals that pick regional banking over offshore banking. According to the US tax laws, the tax return of an US taxpayer should get the report on income generated beyond the US.