Offshore account - what is this?

Offshore banks are often associated with a high level of financial sophistication. Nevertheless, the reality is that anyone can start working with them. It only takes a few hours.

The media often demonize investments in offshore, drawing in the imagination the secret offshore accounts of world politicians who stashed their money in some illegal company located on a little-known Caribbean island where the tax rate is almost zero. Although there will always be cases of such shadow deals, the overwhelming number of them is perfectly legal.

Why do I need an offshore account? It allows you to attract investments representing a wide range of strategies that take advantage of the advantages offered abroad by the investor.

Reducing the tax burden

Many countries, called tax havens, offer foreign investors preferential treatment. The low tax rates levied on offshore companies are designed to help create a healthy investment environment that attracts external investment. A tiny state with scant resources and a small population views foreign customers as an opportunity to significantly improve its own economic situation. In other words, investments come to where investors create offshore companies.

Corporations play the role of a shell, protecting customers' accounts from high taxation in their country. Since they do not participate in local economic activities, no tax is levied on them. Many foreign companies also enjoy tax-exempt status when they invest in US markets. Thus, making investments through foreign corporations has a clear advantage over investing money through an offshore account of an individual.

Asset Protection

Offshore account is a popular way of asset restructuring. Through funds, trusts and companies, ownership can be transferred to others. Those who fear the court and creditors, decides to send part of the funds abroad. Passing ownership rights on paper, individuals no longer fear the confiscation of property or similar troubles.

Bank secrecy

Offshore account is a strict banking and commercial secret, fixed at the legislative level. If it is violated, the guilty party will answer with all the severity of the law. An example of a breach of confidentiality is the disclosure of the client's identity. In addition, in some countries, the disclosure of information about the owners of the company will also be a violation. But this does not mean that investors are criminals who have something to hide.

It should be remembered that offshore legislation allows disclosing personal data in the case of money laundering, illegal drug trafficking or other unlawful activities. From the point of view of an upscale exchange player, however, keeping confidential information such as the identity of a buyer, while buying shares of a public company, can offer the latter significant financial (and legal) advantages. Multimillionaires do not like it when a lot of small investors buy the same shares that they are, since it raises prices.

Diversification of investments

Some states restrict their citizens in freedom to invest abroad. Many believe that this does not allow creating a real diversified investment portfolio. Offshore account is the possibility of obtaining unlimited access to world markets and to major exchanges. In addition, there are many opportunities in developing countries, especially those that are beginning to privatize sectors of the economy that were previously under government control.

Primary requirements

Each offshore bank and foreign jurisdiction has its own requirements, so it is necessary to conduct preliminary studies to find what is needed in a particular situation. Below is an overview of what can be expected based on information about known financial centers such as the Bahamas, Bermuda, the Cayman Islands and the Isle of Man.

How to open an offshore account?

The rules for opening such an account are similar to those that operate in any other country. Offshore banks will request personal information such as name, citizenship, residence, date of birth and place of work.

To verify the identity, you need to provide a copy of the passport, driver's license or other identification documents issued by the government agency. In addition, banks are checking their place of residence, as this may affect tax issues. To do this, it will be sufficient for them to submit bills for utilities or similar papers.

Due to the wide variety of identification documents that can be submitted to offshore banks, an additional guarantee of their authenticity is often required. In some cases, it will be sufficient to provide a notarized copy, and other centers prefer apostille, a special type of certification mark that is used internationally. To receive it, you must visit a government agency authorized in this country to make such a mark.

Additional identification documents

Offshore banks to open an account put forward additional, not exactly the usual requirements. This is necessary in order to prevent money laundering, tax fraud or other illegal activities that are associated with such institutions.

First, to open an account, you can ask for financial documents of the client's current bank with indication of average balances and confirmation of "satisfactory relations". Usually this is an account statement for the last six months or a year.

Secondly, many banks ask about the nature of the expected transactions for the account being opened. This may seem too intrusive, but these institutions are under scrutiny so that illegal activities can not be conducted in them. To this end, offshore banks require the provision of additional documentation confirming the origin of the funds invested.

If money is a salary, an extract from the employer's payroll is required. In order to confirm income from investments, an offshore bank can request information about the nature of the latter and the location of their investment.

If you have significant funds received from a business or real estate transaction, you will need to provide sales contracts or other relevant documents. If you invest money received under an insurance contract, you will need to provide a letter to the insurance company. If the money is inherited, they can ask for a letter from the property manager confirming this fact.

Select currency

Offshore account is the ability to store money in the desired currency.

It is necessary to know about the consequences of maintaining such accounts. For example, depositing funds in certain currencies will allow you to receive interest on deposits, which can also lead to external tax liability. In addition, to put money on deposit accounts and withdraw them, you need to exchange currencies, which can be accompanied by significant costs, depending on the structure of fees and the proposed exchange rates.

Money transfer

Offshore bank account is often supplemented by international wire transfers. Unfortunately, the systems that allow free transfers, often found in conventional banks, are generally not able to make international payments.

Sending money is a simple operation, but almost everyone takes commissions for it. Tariffs vary from bank to bank, so it is necessary to familiarize with them in advance. Unfortunately, there are few good alternatives. Checks are usually not accepted abroad, and cash depositing is impractical.

Withdrawing money

How to withdraw money from an offshore account? To make it as easy as possible to use the services of banks, they offer clients a variety of ways to withdraw their funds. Many give out a conventional debit card, which makes it easy to access money all over the world. It is necessary to familiarize yourself with the tariffs for using this method, since international fees can be significant. One-time withdrawal of large amounts of cash can help minimize these costs.

Some offshore banks offer checks. This is usually not the best way to withdraw funds. First of all, because confidentiality is not preserved. In addition, checks issued to foreign banks are not always accepted.

The best option can be the use of two accounts: offshore and domestic. Thus, electronic transfers can be used to transfer large amounts to an internal account, where they become readily available. This method has great reliability and confidentiality, and also provides convenience of local banking services.

Mysteriousness is dispelled

Despite the mystery surrounding the country with special business conditions, opening an account with an offshore bank is relatively simple. Often, all you need is to fill out forms, provide identification documents, and additional information confirming the lack of intent to conduct illegal activities.

The choice of currency, the optimization of deposits and withdrawals are slightly more difficult, but the choice will be easier after studying the bank's tariffs.

How safe are offshore investments?

Popular offshore companies offer quite safe investment opportunities and many well-known companies use them. More than half of the assets and investments in the world are conducted in offshore jurisdictions. Nevertheless, as with any operation, one should be guided by common sense and choose an authoritative investment company. It will be also good to consult an experienced and reputable investment adviser, an accountant and a lawyer who specialize in international investment. If the goal is to protect assets or have an interest in real estate or transfer of business, it would be advisable to find a lawyer (or a team of lawyers) specializing in the protection of assets, wills or succession. Of course, the services of these specialists are worth the money. In most cases, the advantages of offshore investments outweigh the huge costs of professional fees, commissions and transportation costs.