Myths about Offshore Banking

Myths about Offshore Banking

Offshore banking is an asset protection strategy that many professionals with a high net worth employ to safeguard and protect their assets. This practice has been around for a long time and it is a highly effective method for protecting short- and long-term assets. Although many professionals have used this practice for many years, there are still some myths about the practice of offshore banking. Below is a list of some common myths:

Myth #1 – Offshore banking is illegal.

Facts
There are a few countries in the world that prohibit their citizens from establishing and holding offshore accounts overseas but not many. Countries with strict control systems such as South Africa, Venezuela, and Russia do not ban their citizens from holding offshore banking accounts. However, most countries do have laws and policies that require offshore account holders to report the existence of an offshore account to a taxing authority. No offshore banking institution advocates criminal activities related to money laundering.

Myth #2 – Offshore banking is only for tax evasion.

Facts
Most people who bank offshore do not establish accounts for the purpose of evading taxes. They are looking instead for legal tax planning and asset protection strategies. Some of these strategies relate to currency diversification and protection against political risk factors.

Myth #3 – You will need a substantial amount of money to have an offshore bank account.

Facts
This myth is true to some extent. Many offshore private banks will only accept a minimum deposit of one million dollars. However, there are a large number of offshore banks for middle class consumers. These banks allow interested persons to open an account with as little as $500 or less, depending upon the jurisdiction.

Myth #4 – Offshore banks are situated in remote corners of the world or obscure islands, thereby making it difficult to handle the account.

Facts
While many offshore jurisdictions are small islands, they are all connected by fiber optic cables! Today, the physical location of the bank is not really important, because you can deposit funds electronically and manage them over a secure Internet connection. For example, for withdrawals you can transfer and wire money using online banking. You can also use an internationally-recognized debit or credit cards like Visa, MasterCard, or American Express to conduct banking and account transactions.

Myth #5 – You have to travel to the bank personally to open an account.

Facts
The best offshore banks do not require this. They have procedures in place for you to open accounts either entirely by mail, using copies of documents certified locally, or you can open accounts through other representatives or offices that may be closer to you in your home country.

Myth #6 - Offshore banking is tax-free.

Facts
In most cases you don’t have to pay taxes in the offshore bank’s jurisdiction. The notable exception is Switzerland which does charge Swiss withholding taxes on the income of foreign account holders. What you do have to remember is that many high-tax countries tax foreign income. For example, the government of the United States taxes the foreign income of its citizens.
Although people new to this banking option may believe some of the myths to be true, there are many benefits to going offshore.
Disclaimer: Many countries have laws regarding offshore entities and accounts. For example, citizens that form offshore entities, (for example an offshore corporation, offshore trust, offshore partnership, offshore limited liability company, etc.) own stock in offshore entities or hold positions within offshore entities may need to file a tax return. Citizens that form an offshore trust, move assets into an offshore trust or are the beneficiary of an offshore trust may need to file a tax return. Citizens that sign on offshore bank accounts or offshore investment accounts may need to disclose this fact to their government and pay taxes on any interest or capital gains. We strongly recommend consulting with a local, licensed professional to obtain tax and legal advice in order to understand the law and to fully comply with all applicable laws and reporting requirements regarding offshore companies, offshore trusts, offshore bank accounts and offshore investments.
The offshore world is the perfect environment for protecting hard-earned assets and obtaining financial privacy.