Offshore banking refers to banks where depositors open accounts outside their country of residence. Their funds are sourced overseas and used abroad. Opening an offshore bank account will provide many advantages.
Most offshore bank jurisdictions have strict rules and regulations to help ensure the confidentiality of identities and transactions of investors and depositors.
Offshore banks serve to protect and safeguard clients’ information, protect assets from domestic litigation and civil matters such as divorce or contested estates.
Although some other arrangements and vehicles such as offshore trusts and foundations can also achieve the goal of anonymity and confidentiality, they are more complicated to establish and run than simply opening an account in offshore banks.
2. Tax Advantages
Contrary to interest from domestic deposits, interest from deposit in offshore banks is usually without tax deducted. This is an advantage for investors who do not pay tax on worldwide income or who can get a favorable tax arrangement.
3. Currency Diversification
Compared to domestic banks, offshore banks usually offer more convenient and diversified opportunities to hold and invest in foreign currencies. And it is a perfect way to diversify portfolio risk, maintain purchasing power and internationalize some of your savings.
4. Higher Interest Rate
Some offshore banks may operate with lower cost and provide higher interest rate on deposits than the rate in the home country. Offshore banks may face lower overheads and fewer government intervention and regulation and have some specific investment opportunities, so it is possible for depositors to get a higher rate and fight against inflation.
5. Reduce political risk
Residents living in area where politics are unstable usually fear that their assets may be frozen, seized or disappear. Offshore banks can offer an opportunity to transfer their assets to politically and economically stable jurisdictions.
Besides, government may pose risk to your savings. For example, bank deposit taxes in Spain, retirement savings nationalizations in Poland, Hungary, Portugal, and Argentina, and capital controls in Cyprus and Iceland.
An appropriate solution to reduce this kind of political risk is to place some of your savings outside your home country. And opening an offshore bank account is a convenient way. Thus, your home country government cannot easily confiscate, freeze, or devalue all of your money.
6. Benefit Developing CountriesSome developing countries can competitively engage in offshore banking due to their policies and regulations. Therefore, they can absorb investment overseas and develop their economy. This will be helpful in redistributing capital and source from developed countries to developing countries.