Offshore accounts:

1.-Definition:
Before we define the term, we must now in what kind of bank we can get them. We can
open an offshore account, in an offshore bank. Is a bank located outside the country of
residence of its depositors, with most of its account holders being non-residents of the
jurisdiction.
So So if we held an account in these banks, that are foreign, especially in a tax haven
country, we are holding an offshore account. A tax haven country means a jurisdiction
where particular taxes, such as an inheritance tax or income tax, are levied at a low rate
or not at all. While the term originates from the Channel Islands being "offshore" from the
United Kingdom, and while most offshore banks are located in island nations to this day,
the term is used figuratively to refer to any bank used for these advantages, regardless of
location. Thus, some banks in landlocked Switzerland, Luxembourg and Andorra may be
described as "offshore banks".

2. How it Works:
The basics of opening an offshore bank account are similar to opening a bank account in
your home country. Offshore banks will ask for your personal information, such as your
name, date of birth, address, citizenship and occupation. To verify your personal
information, you can expect to submit a copy of your passport, driver's license or other
identifying documents issued by a governmental agency. Additionally, banks are
concerned with verifying your residence or physical address since this may affect
taxation issues. This requirement may be satisfied by presenting a utility bill or similar
documents.
Due to the wide range of different identification documents that may be presented to
offshore banks, additional assurance of a document's authenticity is often required. A
notarized copy of certain documents may suffice in some cases. Other offshore centers
prefer an "apostilles" stamp, which is a special type of certification mark that is used
internationally. Where this is the case, you will need to visit the government office that is
authorized to issue this stamp for your state or nation.
In offshore banking, there are often considerable additional requirements to open the
account to which you may not be accustomed. These requirements are in place to
discourage money laundering, tax fraud or other illegal activities that are often associated
with offshore banking.
Offshore savings accounts allow you to save in different currencies. And, contrary to
popular belief, you dont have to be hugely wealthy to take advantage of them. There is

little point opening an offshore account in the hope of dodging tax, though. Despite
scandals involving high profile names using offshore accounts to avoid paying tax, you
are generally liable for tax on the interest you earn in the same way you would be in the
UK. Offshore accounts are not for everyone, but they are useful if you work or live
abroad, regularly travel overseas or hope to retire to another country. The ability to save
in the currency in which you are paid or expect to fund your retirement, for example,
removes the risk of losing out on exchange rate fluctuations. Some people actually use
offshore accounts to play exchange rates in a bid to boost their returns by converting the
cash back into pounds when sterling is weak (as well as deferring the tax bill on their
returns see below for more details). However, you could lose out if you have to change
your savings back to sterling when the exchange rate is poor. Even though some
offshore accounts can be opened with 1, the high operating charges withdrawal fees
can be up to 25 make them less attractive to smaller savers or those needing regular
access to their money. Standard savings accounts used to pay interest after tax has
been deducted at the basic rate of 20%, while offshore savings accounts have always
paid interest without deducting tax. Since April 2016, both standard and offshore savings
accounts pay interest without any tax deducted. This is due to the introduction of the new
Personal Savings Allowance. Basic-rate taxpayers have no tax to pay on the first 1,000
of interest, and higher-rate taxpayers will have no tax to pay on the first 500. However,
interest earned above these thresholds will still be taxable, so you can't use offshore
accounts
to
avoid
paying
tax.
You You are obliged to declare any savings interest earned to HM Revenue and Customs
(HMRC) on a self-assessment tax form and to pay tax on it in due course. Otherwise,
you could face a big fine plus interest on whatever you owe.

3. Advantages and disadvantages:

o The Advantages:
You can bank in different currencies and even multi-currencies which is of advantage to
expats with financial commitments in more than one nation or currency for example.
If the nation in which you live has a less than favourable economic climate, by keeping
your wealth in an offshore bank account you can avoid the risks in your new nation such
as high inflation, currency devaluation or even a coup or war.
For those expats living in a nation where you only pay tax on the money you remit into
that country, there is an obvious tax benefit to keeping your money in an offshore bank
account.
Offshore or international accounts are usually designed to offer customers maximum
flexibility in terms of account usage. Expats can benefit from this no matter where they
are in the world as it can mean they can access their funds from ATMs or online or over
the phone at any time of the day or night, no matter what the time zone.

 Any interest earned is usually paid free from the deduction of taxation. For those who
dont pay tax on foreign sourced income this means they can enjoy greater returns
immediately, without having to apply for a rebate.
You can potentially enjoy greater account privacy by going offshore. Some jurisdictions
e.g., Switzerland place great emphasis on maintaining client confidentiality at all times.
For anyone wishing to protect their assets from unfair or speculative litigious behavior for
example, an offshore bank account can be an added deterrent.
An offshore bank account can be a tool in the armory of those seeking to protect their
estate from inheritance taxes in the future. Accounts tied to trusts or companies can
sometimes be beneficial for the legitimate avoidance of estate taxes upon death. Note:
specialist estate planning advice needs to be sought by anyone seeking to benefit from
such an advantage.
Some offshore banks charge less and some pay more interest than onshore banks. This
is becoming less and less the case nowadays, but its worth looking closely at whats
available when seeking to establish a new offshore bank account.
Because many of the high street banks have offshore arms, you can potentially remain
with your current banking provider when you expatriate and simply swap to having an
international or offshore account.
Less government intervention in offshore financial centres can mean that offshore banks
are able to offer more interesting investment services and solutions to their clients.
You may benefit from having a relationship manager or private bank account manager if
you choose a premier or private offshore bank account. Such a service is of benefit to
those who desire a more hands on approach to their accounts management from their
bank.
o The Disadvantages:
Historically banking offshore is arguably riskier than banking onshore. This is
demonstrated when examining the fallout from the Kaupthing Singer and Friedlander
collapse on the Isle of Man. Those onshore in the UK who were affected locally by the
nationalization of the banks parent company in Iceland received full compensation.
Those who had deposits remotely in offshore accounts in the Isle of Man were lucky if
they were repaid the 50,000 guaranteed by the depositor protection scheme.
The term offshore has become synonymous with illegal and immoral money laundering
and tax evasion activity. Therefore, conceivably anyone with an offshore bank account
could be tarred, by some, with the same brush even though their offshore banking
activity is wholly legitimate.
You have to choose your offshore jurisdiction carefully. Whilst you may well be aware of
how the banking industry operates in your own home nation and how it is regulated, the
rules and regulations abroad differ massively. Also, some offshore havens are less
stable than others.

 Its also important to look at the terms and conditions of an offshore bank account. Will
you be charged higher fees if you fail to maintain a minimum balance, what are the fees
and charges for the account and the services you may wish to utilize?
It can be more difficult to resolve any issues that may arise with your account if you hold
it offshore. This is because you cannot physically visit your branch and speak to
someone in person.
There are fewer advantages to banking offshore today than there were just 10 years ago
therefore unless youre specifically seeking flexibility for example, an offshore bank
account may be overkill for your financial circumstances.

4. Bibliography:

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By Eric Fontinelle.