Introduction To Banking
A proper introduction to banking will give you an idea of the different types of banking that is available today. You can either have a bank account onshore – in your country of residence or you can have a bank account offshore.
There are various benefits in banking onshore and offshore depending on what you are planning to do with your money. If you are planning to invest offshore, then obviously offshore banking will be ideal for you. However, it’s important to look at some of the benefits of offshore banking before you sign up for an account at one of the offshore banks.
An offshore bank1 is a financial institution that is located outside your country of residence. One of the main reasons why people choose offshore banks is to capitalise on tax free or low tax jurisdictions.2 Holding an offshore bank account will also permit you to invest in markets that you normally do not have access to in your country of residence. Offshore banking is in many ways similar to that of a local bank.
Benefits Of Offshore Banking
In the past offshore banking was only available to the wealthy, but in recent times this has changed. Today offshore banking is a way for individuals and companies to invest their money in favourable international markets and receive immediate and long term financial benefits. Some of the other benefits of offshore banking include;
- Zero or low tax
- Financial and economic stability of the chosen jurisdiction
- Improved asset protection3 and management4
- Safe and secure banking
- Flexibility in access of funds globally
- Higher interest rates
One of the important steps of offshore banking is finding the right jurisdiction. There are hundreds of offshore banks all over the world. It’s important to determine which jurisdiction will be favourable to you depending on your investment strategy. Once you have found the right jurisdiction, you will need to choose the right bank and the right type of account. You can contact a professional firm to assist you with opening the bank account.
Types Of Bank Accounts
There are basically three types of offshore bank accounts you can choose from; personal, corporate and investment. The bank account opening process is different for each of these accounts.
A personal account is for private use and not for business purposes. A personal account can be used to enhance your personal capital.
A corporate account is used by companies and businesses and the services offered in these bank accounts are tailored to meet the demands of such persons. To open a corporate account a certain capital amount will be required.
An investment account is for potential investors and has certain features that are designed to manage and their wealth. Investment accounts can be used to pay for stocks, mutual funds, custodial accounts and other investments. This account is also classified as a financial tool.
You can contact us and speak to our financial adviser5 regarding introduction to banking.
In order to be successful in your business especially if you are conducting business overseas, you will need to engage in international banking. Looking for an international bank that is efficient in giving you various financial services and products has become easier as different economies continue to become globalised. The combination of modern technology and the world of finance have paved the way for the advent of e-banking. This has helped in increasing the number of financial institutions which companies can rely on in satisfying their international banking needs.
Companies engage in international banking to help them manage their international business ventures. Depending upon the type of industry in which your business operates, there are a number of financial services that international banks can provide to help you improve your total profits. Commodity and multi-national companies, consumer product manufacturers and capital equipment are among the main users of international trade financing products.
Such products include import, export and stand-by letters of credit, trade-related loans, collections, barter and structured trade. The letter of credit’s the most common among a vast list of financial products and services. It’s an international banking mechanism which allows importers to provide more secured terms of sale to different exporters.
Reasons Why You Should Invest In International Banking
There are a lot of reasons why more and more individuals and companies prefer international banking. People all around the world take refuge in offshore banks to protect their money from unfavourable domestic estate and income taxes. Such banks based in countries such as Belize, Cayman Islands, Isle of Man and Panama offer low to zero offshore account taxes.
However, you must have a full understanding of the laws of the foreign jurisdiction and your own country of residence to make sure that tax avoidance will not be interpreted as tax evasion. Some people use international banking to take advantage of good financial opportunities that booming and developing countries have to offer.
In addition, wealthy individuals place their assets in international banks to safeguard them from creditors and other financial litigations. But this doesn’t necessarily mean that the people who invest in international banking are involved in illegal activities. International banking is simply the best option for those who wants to avoid losing their valuable assets from an unexpected or destructive lawsuit.
It is also advantageous for companies or individuals with an international identity to conduct their businesses around the world with ease. For example, having an offshore bank account will make it unnecessary for an individual to open a multitude of accounts around the globe and transact from one bank to another to settle his bills.
What Does International Banking Involve?
Once you’ve decided to engage in international banking, it’s important to understand the banking procedures it may involve. You may be requested to verify your identity including those who have ownership interest in your assets. The bank may also interview you and ask about your intentions in international banking. Furthermore, you may also be asked regarding the origin or source of your financial deposits.
Offshore banks are banks that are situated outside the depositor’s country of domicile. It’s typically within a jurisdiction which offers law taxes on offshore accounts. Such a jurisdiction is often termed as a tax haven. Offshore banking provides financial security, privacy and protection from unfavourable tax laws in one’s home country. Because offshore banks are protected by the bank secrecy law, the non-declaration of assets or the evasion of tax by the depositor is considered legal.
Generally, offshore banks use honour systems which allow you to decide whether or not to declare your income. However, the continuous evolution of the depositor’s own government tax laws may cause several issues that may conflict with his interests. Nonetheless, offshore banking provides utmost confidentiality on your account and prevents other people from meddling with personal financial affairs. This is why offshore banking became so popular among people who aim to protect their hard-earned assets.
Advantages Of Opening Accounts In Offshore Banks
A lot of offshore banks are located in both politically and economically stable jurisdictions. This serves as an advantage for individuals who are residing in a country where there’s political unrest and fears that his assets may be seized, frozen or disappear. Your presence is not required in opening an offshore bank account. You also do not need to regularly visit the country where you deposited your money. Some jurisdictions like Switzerland allow you to open a bank account through e-mail together with proper identification documents. Bahamas, Bermudas and Cayman Islands are among the most popular jurisdictions for offshore bank accounts. In addition, here are some of the many benefits of offshore banking:
- There are offshore banks that allow you to open an account at a lower cost rate and offer much higher interest rates than the banks found in one’s home country. This is because of limited government intervention that may come in the form of domestic income taxes.
- Offshore banking is among several industries where geographically remote nations may engage competitively. It helps developing countries get sources of investments which results in economic growth. It also helps in redistributing global finance from the developed countries to the developing nations. But developed countries like New Zealand also offer an equally safe environment for offshore bank accounts.
- Offshore banks may offer financial services that are not available in the local banks. Such services include anonymous accounts, rate loans that are more advantageous to the depositors based on different risks and investments opportunities.
- Offshore banks are usually linked to other offshore finance structures, such as offshore agencies, foundations and trusts which may provide significant tax benefits for some people.
Offshore Banks And Their Critiques
Many advocates of offshore banks affirm that tax and banking competitions benefits the banking industry as well as the people as it allows individuals to choose banking services and taxes appropriate to their needs. However, critics claim that banking competition is disastrous for national development. They argue that it only pushes for the developing countries to go down and deregulate their local banking systems to dissuade their people from investing their assets offshore.
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