What is Offshore Bank?
What is Offshore Banking?
An offshore bank is a bank located outside the country of residence of the depositor. It is usually located in a tax haven that provides financial and legal advantages. The main advantages of offshore banks are
- less restrictive legal regulation
- some off-shore banks may operate with a lower cost base and can provide higher interest rates
- off shore banks provide access to politically and economically stable jurisdictions
- interest is generally paid by offshore banks without tax deducted
- offshore banking is often linked to other structures, such as offshore companies, trusts or foundations
- Offshore banking has often been associated with the underground economy and organized crime, via tax evasion and money laundering. Offshore banking does not prevent assets from being subject to personal income tax on interest. The personal income tax of many countries makes no distinction between interest earned in local banks and those earned abroad. Offshore banks may decide not to report income to other tax authorities, and have no legal obligation to do so as they are protected by bank secrecy, this does not make the non-declaration of the income by the tax-payer or the evasion of the tax on that income legal.
- An offshore bank is located in a country where banking, business and tax laws offer advantages that are not available to customers at home. These advantages include confidentiality, anonymity, favorable tax treatment, sheltering assets, estate planning and efficiency in international trade. All of these goals are legitimate and perfectly legal. While the benefits and reporting requirements vary somewhat depending on your country of residence, there are few restrictions on banking and investing abroad. An increasing number of individuals and companies use offshore investing and banking as a part of their overall financial strategy.