The Pros and Cons of Offshore Banking. Offshore Banking Offers a Safer Place for Assets
Offshore banking is a well-liked form of setting aside money in a foreign country. There are many advantages to offshore banking, such as increased confidentiality for your cash and immunity against political or financial insecurity. Offshore banking was originated in the Channel Islands, and most offshore banks are located in island nations. Yet the word is also used to refer to banks in states such as Switzerland, Andorra and Luxemboug which are not surrounded by water but are more removed from the surrounding countries.
Not surprisingly, due to sitting in tax-friendly countries or islands, offshore banking is regularly equated with tax escape. On the other hand, capital that sits in an offshore bank account is not in all cases exempt from income tax. The same rules apply to interest earned on the funds in offshore bank accounts. Unless you have special dispensation , you are likely to have to pay income tax on the interest you gather regardless of where that money is stored – here or overseas.
If you reside in a country where there is a tense political situation, or there are problems within the public, it can be advantageous to keep your assets in an offshore bank account. By keeping it in a local bank account you could be in danger of the funds being removed, frozen or ending up without worth. An additional plus point is that many offshore accounts provide better rates than in the country of residence and there may be fewer running costs involved. You may also be able to apply for an anonymous bank account which your traditional bank might not be able to offer. To this point it appears as though offshore banking offers a lot of benefits, so what are the disadvantages?
One aspect that could be less appealing to a prospective customer is the fact that the assets held in an offshore account may in fact be less secure. This is illustrated in the recession of 2008 -9, where assets sitting in offshore checking accounts in Iceland was lost. Yet if the bank in question provides a worthy compensation programme, this may rescue some of the lost funds in case of a grave financial fallout. Another downside to offshore banking is that it is often aimed principally at people with higher salaries. Lots of bank accounts of this kind do hold high upkeep costs so they may only be worth considering for you if you do receive a large income. However, lots of them do offer savings options which can be accessed by people with regular incomes too.
This entry was posted on Sunday, January 29th, 2012 at 4:39 am and is filed under General. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.