Offshore banking- you must have heard of this phrase some time or another or pretty recently if you have been paying attention to the Panama Papers leak. The news is out, what the masses suspected for many years has all been laid out in the open and it is there for all of us to see.
While most people are happy reading the gossip about the leaked papers, the more finance centric ones amongst us wonder yet again about offshore banking and why almost every celebrity or a rich successful person has offshore banking accounts. What is it about them that is so lucrative to these rich and famous people? The short answer is, a whole lot. For the long answer keep reading.
What is offshore banking?
If you ask ten different people or even bankers they will describe offshore banking in ten different ways. It can be taken to refer to the act of conducting banking activities in a currency that is foreign to the native currency of the said bank. But that would be its description from a banking point of view.
From a more general point of view, it simply refers to any bank account an individual or a corporation holds outside of their country of residence or operation. So a person who is an American citizen and lives in the country but has a few accounts in the Bahamas and Belize would be said to practice offshore banking. It is as simple as that.
Why would someone want an offshore banking account?
Ask a person off the street and they will tell you that anyone who has an offshore bank account or is involved in running a company in a tax haven is trying to evade tax or do some kind of a bad thing but this is not always true. Sure there are bad elements in society like drug dealers and gangsters or other kinds of fraudsters who might want to hide their money in a secret place but not every rich person who does it have the same reason.
For example, a lot of rich people do it, as they want to safeguard their money against any political or economic downturns in their country of residence. People who have hard earned a lot of money want to keep it in a safe haven where any external events won’t see it going down the drain in a single instance.
Remember the bankruptcy of Lehman brothers? They were such a huge multinational organization that no one could’ve ever predicted their downfall. It is like saying that JP Morgan will go but soon. But it did happen and when it did, it was proven that they were nearly insolvent.
Take for the matter the fact that the US government’s net worth is minus 17 trillion dollars and that for us is the most prosperous country in the world. Is it any wonder then that a lot of rich people in the US want to go for the offshore banking option but are forced to stay in their own country coz of the strict, almost dictatorial laws of the IRS.
In a nutshell, when you have a poor capitalized banking system that is backed by an insolvent central reserve and a government whose net worth is massively in the negative, you’d be better off looking for offshore banking option in jurisdictions that are much more stable.
Other benefits of offshore banking
Apart from security and a strict sense of privacy an offshore banking jurisdiction also helps you in ways of taxation. Place where these banks are usually located are often referred to as tax havens as the rate of taxation on income and capital gains in such jurisdictions is often considerably lesser than your home country.
In many of these places you get a chance to earn a lucrative interest in your savings and at that, the interest earned is almost always exempt from tax.
With an offshore account you have the option of dealing in currencies other than, your own which means that you get to enjoy the stability of a foreign currency investment. Even if the currency of your home country devalued greatly, your funds would be safe nonetheless.
Offshore banking provides you with a piece of mind and a chance to maximize your own personal freedom. Whether it is about safeguarding your financial resources or diversifying for gains, offshore banking is without a doubt the way to go for people who want to plan their financial future soundly.
While most people are happy reading the gossip about the leaked papers, the more finance centric ones amongst us wonder yet again about offshore banking and why almost every celebrity or a rich successful person has offshore banking accounts. What is it about them that is so lucrative to these rich and famous people? The short answer is, a whole lot. For the long answer keep reading.
What is offshore banking?
If you ask ten different people or even bankers they will describe offshore banking in ten different ways. It can be taken to refer to the act of conducting banking activities in a currency that is foreign to the native currency of the said bank. But that would be its description from a banking point of view.
From a more general point of view, it simply refers to any bank account an individual or a corporation holds outside of their country of residence or operation. So a person who is an American citizen and lives in the country but has a few accounts in the Bahamas and Belize would be said to practice offshore banking. It is as simple as that.
Why would someone want an offshore banking account?
Ask a person off the street and they will tell you that anyone who has an offshore bank account or is involved in running a company in a tax haven is trying to evade tax or do some kind of a bad thing but this is not always true. Sure there are bad elements in society like drug dealers and gangsters or other kinds of fraudsters who might want to hide their money in a secret place but not every rich person who does it have the same reason.
For example, a lot of rich people do it, as they want to safeguard their money against any political or economic downturns in their country of residence. People who have hard earned a lot of money want to keep it in a safe haven where any external events won’t see it going down the drain in a single instance.
Remember the bankruptcy of Lehman brothers? They were such a huge multinational organization that no one could’ve ever predicted their downfall. It is like saying that JP Morgan will go but soon. But it did happen and when it did, it was proven that they were nearly insolvent.
Take for the matter the fact that the US government’s net worth is minus 17 trillion dollars and that for us is the most prosperous country in the world. Is it any wonder then that a lot of rich people in the US want to go for the offshore banking option but are forced to stay in their own country coz of the strict, almost dictatorial laws of the IRS.
In a nutshell, when you have a poor capitalized banking system that is backed by an insolvent central reserve and a government whose net worth is massively in the negative, you’d be better off looking for offshore banking option in jurisdictions that are much more stable.
Other benefits of offshore banking
Apart from security and a strict sense of privacy an offshore banking jurisdiction also helps you in ways of taxation. Place where these banks are usually located are often referred to as tax havens as the rate of taxation on income and capital gains in such jurisdictions is often considerably lesser than your home country.
In many of these places you get a chance to earn a lucrative interest in your savings and at that, the interest earned is almost always exempt from tax.
With an offshore account you have the option of dealing in currencies other than, your own which means that you get to enjoy the stability of a foreign currency investment. Even if the currency of your home country devalued greatly, your funds would be safe nonetheless.
Offshore banking provides you with a piece of mind and a chance to maximize your own personal freedom. Whether it is about safeguarding your financial resources or diversifying for gains, offshore banking is without a doubt the way to go for people who want to plan their financial future soundly.
