8 Facts You Should Know About Offshore Banking
Perhaps you’re interested in setting up an offshore bank account. However, one internet search is all it takes to find that there’s a lot of conflicting information about offshore banking. So, what’s true and what’s not?
To help you answer that question, here are several basics about offshore banking that not everyone knows. Use these as a foundation for determining what type of accounts are right for you and which offshore location would provide the most benefits.
1. Having an Offshore Bank Account is Perfectly Legal
Some of what you’ve read indicates there are legal issues with having offshore checking or savings accounts. This stems from the perception that people only use offshore banking to dodge paying taxes or launder money. This is not the case.
It’s perfectly legal to have bank accounts based in many nations other than where you have your citizenship. Taking things one step further, banking laws in most countries allow for safeguards that would make using offshore banks for nefarious purposes punishable by fine and/or incarceration. Most offshore banking clients use those accounts for legitimate purposes and are well within the laws that apply at home and in the country where the bank is located.
2. Open Offshore Accounts Without Leaving Home
There was a time when there were only two ways to open offshore accounts. One involved visiting the country where you wanted to open accounts and handling the process with the aid of a local agent. The second approach empowered an agent to open the accounts on your behalf.
That’s not the way things work today. It’s possible to begin the application process online, submit digital documents that confirm your identity, and transfer funds from a domestic account to the new offshore checking, time deposit, or savings account. Banks in some nations may require you to send notarized physical copies of the documents for comparison with the digital versions you submitted. In any case, you don’t have to leave home to have those new offshore accounts opened and ready for use.
3. Remote Account Management is Easy and Secure
Think about how you use an online interface to manage your domestic accounts. It’s easy to move money in between accounts, receive deposits, pay bills, and in general, use the accounts in any way that you see fit. The same is true with your offshore bank accounts.
You can access your offshore accounts any time that you like. Check the balances, move money from your savings to the checking account, use a bill pay feature, or make deposits. All of this can be done any time of the day or night. Depending on what type of transaction you initiate, there may be an immediate confirmation. Other transactions will show as completed during the next business day.
4. It Takes Less Money to Open an Account Than You Think
There is a perception that it takes a lot of money to open an offshore account. That’s not true. In some nations, banks allow offshore clients to set up accounts with lower balances than what you pay for your monthly mortgage or even a couple of weeks of groceries.
Remember that while you can open accounts with modest starting balances, it may be some time before those balances begin to generate any interest. Many offshore banks have requirements for minimum balances that must be met before you earn any return on the money in your account. Keep adding to the balance, and before you know it, you’ll be generating interest income.
5. Offshore Banks Are Stronger and More Stable Than Many Realize
You may have heard that offshore banks are not as safe or as stable as the institutions at home. While banking laws vary somewhat from one country to the next, that does not automatically mean that the protections you enjoy at home are inherently better. Depending on which offshore location you choose, the bank in question may offer you more protection than what you have domestically.
The only way to know for sure is to look closely at the laws that apply in that offshore location. You can also talk with the bank representatives and find out what they do to protect the interests of their depositors. You may be surprised at how much protection you have from adverse shifts in economic states and other events that typically impact financial institutions.
6. Many Offshore Banks Generate Their Revenue in Diverse Ways
You’re used to the fact that your domestic bank utilizes deposits to underpin loans that are offered to others. The money in your local account is funding lending activity for someone else at any given time.
This is not likely to be a concern with your offshore accounts. The reason is that the laws and policies that apply to many offshore banks do not rely on customer deposits to make loans. Instead, it’s the money from charging fees that aids in offering loan opportunities. Think of this as one of the ways that all your money remains readily available to you.
7. Offshore Bank Accounts are Great for Global Investment Strategy
You already know how to use your domestic accounts to provide funding for investment opportunities closer to home. Perhaps you’ve found that trying to use those same accounts for global investing is more complex. The solution is to open offshore investment accounts that can be used for that global activity.
It’s not just the ease of using currency conversion to the best advantage. You may find that the fees and charges applied to the global investment account are competitive with what you would pay at home. Also, the actual purchase, sale, and management of those global assets are likely to be easier, so it’s clear to see why opening an offshore account makes sense.
8. Reporting Accounts to Domestic Tax Agencies
There’s an error in perception about what you must tell domestic tax agencies about your offshore accounts. Simply put, you need to make those accounts’ existence known. This is particularly true if the balance in those accounts exceeds an amount set by the tax agency in question. Depending on where you live, the need to report information may apply to individuals and businesses.
Be aware that many offshore banks will report a minimum of data to your domestic tax agencies. This can be done without revealing all the account details. For your part, know which forms to use to report the accounts as part of your tax filings and how much must be in the account before it must be reported. You’re likely to find that your offshore bank can provide documentation that makes it easier to fill out necessary domestic tax agency forms.
Offshore Bank Experts Can Separate Fact from Fiction
Are you considering the idea of establishing offshore bank accounts? The team at Caye International Bank is happy to answer any questions you may have about offshore banking solutions.
Contact us today to learn more about the accounts we offer, the process for establishing an account, and how to determine which account type would help you reach your financial goals.
This article originally appeared here on Finextra.