The benefits of offshore banking

The benefits of offshore banking
24 October 2010

MANY people associate offshore banking with the super rich, but the benefits extend far beyond the very wealthy – ranging from access to more innovative banking products to asset protection and anonymity.

The term “offshore” describes nothing more than a jurisdiction other than the one in which you are usually domiciled. Therefore, any jurisdiction can be offshore. For example, the US is one of the world’s largest offshore jurisdictions (for non-US citizens).

In most cases the word “offshore” is used to describe low or no-tax jurisdictions that have promoted special legislation to attract business and interest from other countries.

There are significant advantages to investing, holding assets, doing business or residing offshore. It can give you broader access to global markets and, therefore, yield more investment opportunities. Your assets can be protected from unsubstantiated lawsuits and unjustified claims. You can enjoy privacy and personal security and, of course, there are many possibilities to reduce taxes legally.

In most countries around the world, your residence is the primary basis of how you are taxed, and since the early 20th Century, people from high-tax jurisdictions have sought to relocate themselves in lower-tax ones.

Places like the UAE, for example, levy very low or nil rates of income tax. Many such jurisdictions are also capital gains and inheritance tax free.

However, that is not to say that those resident in the UAE and other parts of the Arab world do not stand to benefit from offshore banking; quite the contrary.

Your financial adviser should be able to recommend a range of banking institutions, which are tax-friendly to non-residents in locations such as the Isle of Man, Jersey, Gibraltar and Guernsey, among others.

Here, cashy looks at the benefits of doing so:

Protect your assets

Protecting your money, whether in a current, deposit or investment account, is an important consideration.

Holding assets offshore can help to protect you from a bank’s collapse. A good example of this is that in late 2008, at the height of the global credit crunch, the States of Guernsey resolved to establish a deposit compensation scheme to protect retail depositors with local banks. Like Britain’s Financial Services Compensation Scheme, the scheme covers the first £50,000 of deposits by individuals.

Meanwhile, the Isle of Man protects 90% of assets held with life assurance firms, should they be unable to meet their liabilities to policyholders. This scheme operates globally, providing protection to policyholders no matter where they live.

Banking offshore will also provide you with the added security of banking in a highly regulated financial market, unlike that of the UAE, which is in the embryonic stage of being regulated.

Pass on assets as you wish

Many expatriates are unaware of Sharia law and how it affects the financial system in the Middle East: in some cases, your assets could end up being frozen, and ultimately be distributed contrary to your desire.

One of the big advantages of offshore banking is that you can choose who your assets are passed to in the event of your death.

Keep it private

Offshore banking ensures your accounts are kept strictly private. The confidentiality of all operations conducted through the account is protected by legislation.

The account is protected from creditors, tax authorities and other interested parties.

 

Pic credit: Tom Curtis/ FreeDigitalPhotos.net

 

Do you bank offshore? Are there other benefits? Tell us below.

Comments

  • mahmoud
    mahmoud
    2010-10-13T18:02:39

    Thanks Rupert, useful article. Would love to see a review of some of the offshore banking service providers.

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Independent Financial Advisor
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