The world of offshore banking is often only known through the limited scandalizing headlines that depict stories of money laundering, tax evasion and secretive bank accounts for the mega-rich.
What people don’t realise is that the offshore banking industry is often safer than banking domestically is perfectly legal and is more often used by average individuals who are anything but the super-wealthy.
Offshore banking provides a legitimate means for just about anyone to protect their assets and maximise their returns. Here, we will take a look at three of the most common misconceptions that people have about offshore banking to perhaps clarify a deeply misunderstood industry.
1. Offshore accounts are a way to evade taxes
While having an offshore bank account in many jurisdictions will enable you to minimise your tax burden, you will not be able to totally evade paying taxes.
Every country has its own unique tax regulations, and many of the jurisdictions which have become popular locations to hold an account have tax legislation that are advantageous to non-resident holders.
By structuring your account properly you will be able to take advantage of these tax structures in accordance with the tax laws in specific overseas jurisdiction.
This is a completely legal and legitimate way to reduce your taxes. This does not however eliminate your tax liability in your country of residence. You are still liable to the government in the country where you reside and must abide by local tax laws accordingly.
2. Offshore banking is used only for illegal activity
Contrary to what the headlines may have told you; the days of complete anonymous offshore banking are at an end. In recent years, there has been a significant drive towards the mutual sharing of financial information of account holders across borders.
Many jurisdictions have had to sign such agreements, under pressure from the EU and OECD making it much harder for complete account secrecy. That being said, there are some favourable offshore jurisdictions where banks still value the importance of privacy and protection of ownership.
Privacy and confidentiality are still maintained in a number of countries around the world, however it is often the laws of a the country where a particular client resides that will make complete anonymity more difficult. If the country where you reside is a signatory of the Common Reporting Standard (CRS), then you will not be able to effectively hide your assets completely from the government, as this is an automatic tax sharing agreement signed by over 100 countries around the world.
However, this does not mean your information is publicly available, it just means that your government has access to your tax information. If you reside in a country who is not a signatory of the CRS then you are one of the lucky few.
Nonetheless, opening an offshore account for a majority of the world is not about hiding your assets, but about asset protection. This is to protect yourself from the reach of hungry lawyers, bad business partners, ex-spouses or anyone looking to reach their hand in your pocket.
3. Offshore banking is only for 1%
This stereotype is a commonly held idea and is vastly out of touch with reality. Nearly any individual with a few hundred dollars can open up an overseas account in say Belize, or a company in Nevis. Access to overseas markets it easier than ever before and is not just limited to the few.
There is such a wide variety of options when it comes to offshore bank accounts. While you might not get into places like Switzerland and Singapore with a few hundred dollars,retirement person, however Andorra or Puerto Rico will gladly take your cash.
Individuals owning an internet-based business or commerce store or any digitally based service stand the most to gain. However, there are many benefits that come when you look to go offshore.
While going offshore will likely still retain some misconceptions as the headlines will continue to report only the dark side of things. However, global banking is not some drug dealing cartel, but is likely to be more similar to your bank at the end of the street.