Offshore Banking for Expats
What is Offshore Banking?
In the banking world, the term “offshore” originally referred to the British Channel Islands, and many expats still hold accounts there. Today, however, the term is not only used for offshore banks in island nations, but also figuratively for those in landlocked countries, such as Switzerland.
These banks are usually located in politically and economically stable jurisdictions, which are also known for their favorable taxation laws. A few examples, in addition to the ones mentioned above, include Cyprus, Liechtenstein, Hong Kong, Singapore, the UAE, Qatar and many Caribbean countries.
Choosing an Offshore Bank
As an expat, you have many options when it comes to where to keep your money. In the article, An Introduction to International Banking, you can find information on the pros and cons of holding bank accounts in your home and host countries. If you have decided to do business with an offshore bank, the next step is to figure out how much of your money you wish to deposit in this account. This will vary depending on your individual financial needs and the country you are living in.
When deciding where to open your offshore account, and especially if you’ve decided to keep most of your money there, you should make sure the bank is located in a country which has a proven record of financial stability. You should also look into how you will open this account. Will you have to travel there in person, or can it be opened online or over the phone? This will obviously make a difference if you have chosen a bank in a remote location.
Advantages of Offshore Banking
Having a secure place for your wealth is one of the main reasons to open an offshore account. Especially if you live in or are relocating to a politically or economically unstable country, with a history of freezing or seizing assets in times of political turmoil, an investment in an offshore account rather than a domestic one will grant you peace of mind.
Offshore banking has a notorious reputation for its role in enabling tax evasion. While it is often true that you can achieve greater tax efficiency by keeping your savings in an offshore account, this does not have to be illegal. Depending on your citizenship and residency status, you may be able to avoid paying interest on your savings kept in these bank accounts.
Citizens of some countries, however, are taxed on their worldwide income no matter where they work. In order to avoid any difficulties when you return home after your international assignment, be sure to use the services of a professional tax advisor who is familiar with your particular situation.