An offshore account can be an invaluable tool for those who need its flexibility and monetary benefits. Find out more about these accounts and who can use them to their advantage.
An offshore account is an account opened by a person in a jurisdiction (location) other than where that person permanently lives. The term ‘offshore’ originally referred to the Channel Islands off the coast of Britain. This was historically one of the first centers for offshore banking.
Offshore banking has come a long way and is indeed one of the recognized major economic channels. Some estimates put the amount of wealth invested in offshore accounts as much as £13-20 trillion. One source estimates that something like one third of the wealth of the world’s “high net-worth individuals”—that is $6 trillion out of $17.5 trillion—is currently held in offshore banking centers.
Many people when they hear of offshore automatically assume that offshore accounts are suitable for a few groups of people. These include the very very rich, or those who have something to hide. The truth, in the vast majority of cases is that offshore accounts hold money that has been deposited and earned by completely legal means. In fact, income and taxation declaration treaties between the countries involved in offshore banking, especially in a post 9/11 world, have made it extremely difficult for offshore baking to be utilized for nefarious purposes. It is also surprisingly affordable to maintain and offshore account
Offshore banking currently flourishes in some 70 offshore centers around the world. These have been vetted and designated by the International Monetary Fund (IMF) and the Organization for Economic Co-operation and Development (OECD). These two groups are watchdog groups who monitor the offshore banking institutions and are responsible in part for the now almost certainty of their legitimate claim as fully operational banks.
There are a variety of situations where an offshore account is desirable. Here are a few:
- Business Owners—Business owners who have a company incorporated in a foreign jurisdiction often open a foreign account in conjunction with the incorporation process. Imagine that you have a large business dealing with a large number of currencies and customers, or a concentration of customers in a certain part of the world. Then you might find a foreign offshore account may be the easiest and most beneficial arrangement.
- Expatriates and Travelers—Living in another country requires expatriates to have sometimes multiple accounts and different countries and sometimes in multiple currencies. It is often possible to open the offshore account from the country in which you originally reside before moving to a new country. This is especially true if a big branch of a bank has a branch on both countries. Sometimes even frequent travelers may find that it is opportune to have a certain amount of funds in a foreign account. If work brings you to a foreign locale regularly, then it may be judicious to have a certain amount of local currency easily accessible.
While the mere mention of an offshore account is often associated with international intrigue and wandering wealthy playboys, the reality of offshore banking is quite a different case altogether. For certain situations, offshore banking is an advantageous choice.