Advantages and Disadvantages of Offshore banking

 Not only does offshore banking account benefit individual account holders, but it also is a powerful means of protection and convenience for offshore businesses. Why should you open offshore bank accounts? Let’s get the answer below:

1.     Tax Benefit: As a matter of concern, taxation optimization is the top priority of most companies going offshore. High tax burden makes people hesitate to open a bank account in their home country. By contrast, opening an offshore bank account in tax havens allows account holders to be entitled to a favorable tax rate-either a lower tax rate or even no tax rate at all.

2.     Better asset protection:  Holding money out of the home country is an effective way for your asset protection. You probably also know about many scenarios of expats who were suddenly blocked from taking money out of accounts. In many countries, the banking system has feeble and unsound protection to account holders’ wealth and assets. This, consequently, can pose serious threats to business themselves.

3.     Convenience: Offshore bank accounts are strongly associated with convenient services. If you are not based in a single country but need to move around for business purposes, then an offshore bank account will be a good choice. The reason for this is that offshore bank accounts are easily accessible from anywhere in the world. Furthermore, offshore bank accounts ensure sufficient service utilities for account user as they can find local or international bank in their home country, such as customized services, 24/7 internet banking, debit/credit cards, ATM networks, and many more.

4.     Better Security: Level of security is a pull factor for many offshore account holders. Unlike accounts that you have opened in your home country, an offshore bank account, especially in a reputable and efficiently operated jurisdiction, will offer a high level of safety where depositor’s money can be kept safe and undisclosed.

5.     More Privacy: Another benefit of offshore bank account is by dint of privacy law. Many offshore banking jurisdictions have enacted several laws of strict corporate and banking confidentiality. These highly put emphasis on anonymity for account holders, allowing accounts information to be kept safe and undisclosed.

6.     Higher Interest rate: Generally, keeping money in offshore banks can offer higher interest rates of savings than that in your home country. And one good way to obtain a good interest rate for your offshore bank account is to set up a long-term account.

7.     Currency Diversification:  Offshore banking enables account holders to have diverse currency portfolio in their offshore accounts. In other words, you can own different currencies in your accounts, as well as make transactions with multi-currencies. In this way, your account cannot easily be influenced by currency fluctuations which can often be seen in home country.

8.     Investment Opportunities: A plus for offshore banking is that offshore financial centers have less government intervention. It means that account holders are able to access a wide variety of investments and funds opportunities.

9.     Multi-Currency Banking: The first advantage of offshore bank accounts is that their services are available in different currencies. The services are especially available in the currency of the country to which most customers belong.

 

Disadvantages of offshore banking:

Despite the multiple advantages of offshore banking, there are also some disadvantages. Here are some disadvantages that you should know before opening a bank account overseas.

1.     Different Process: The processes of opening an account are different in different locations. For example, the KYC process of opening an account in New York will be different from opening the same account in London. To find out the fight offshore bank account for your needs, you might need some research and evaluation. Knowing the KYC requirements are important before applying an offshore bank account.

2.     Access can be hard: Accessing your funds can be tough in offshore bank accounts. You may not be able to access your funds as easily as in local bank accounts. While they offer you debit cards that you can use for shopping and withdrawing cash, some transactions may take three to seven days to complete. It can be difficult when you want to do the transaction immediately or on the same day.

3.     Expensive than local bank accounts: Overseas bank accounts are usually expensive as compared to local bank accounts. Companies offering offshore banking services recognize that wealthy people use these international accounts and therefore charge accordingly. If you want to establish an offshore company, the legal fees in this country could be high and you could even own a property in this country before starting a business.

4.     Less Security: You may not get FDIC protection if your overseas bank accounts go down. There is no possibility of getting the money back if the money is lost or the offshore bank goes bankrupt. If you decide to put your money in a foreign account, be sure to sign up with a professional to help you choose a reliable location.

5.     Negative implications: 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.

6.     More due diligence needed: 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.