The Basics of an Offshore Bank Account
The movies often give a bad impression to offshore bank accounts, and for most people, this is the most they know about it. But in reality, having a bank account abroad is absolutely legal.
Facts about Offshore Bank Accounts
An offshore bank account is just an account opened in a different country. It has the same basic properties as a regular local bank account, you need to provide personal information and other basic requirements. You can also deposit or withdraw funds, and it earns a certain amount of interest. It’s perfectly legal to open an account abroad, although it has been used by some for illegal purposes. Offshore accounts offer certain perks, which could prove to be beneficial for your financial future.
Pros of Opening an Offshore Bank Account
- Regular purchases in another country – Many people consider opening an account abroad for convenient purchases and payments. For example, some people preparing for their retirement abroad may set up an offshore account to easily acquire a property, furniture, and other similar big purchases.
- Protects Your Funds from Government Regulations – Each country has its own set of banking laws. Some offer more protection to depositors. This is a big draw for some people who divide their funds and transfer part to offshore accounts.
- Investment Opportunities – Other countries may also offer higher interest rates as well as other investment opportunities that might not be available in your home country.
- Tax Advantages – There are also countries that give you the opportunity to pay lesser taxes while you maintain and grow your funds.
Cons of Opening an Offshore Bank Account
- Tax Issues - Although having an offshore account may offer you tax advantages, be sure to check out all taxes in your country of origin, that you may need to pay by maintaining them. It may turn out that the cost may be not worth it. Being ignorant of the law doesn’t excuse you from the implications of violating tax laws so you might have to pay hefty fines and fees.
- Political/Economic Stability of a Country – Be careful where you open an offshore account. Many developing countries will offer a lot of advantages mainly because they need capital. Make sure that their government and economy have experienced enough stability for a considerable period of time or you may just end up losing most, if not, all of your funds.
Opening an offshore account is definitely fine depending on your personal requirements and as long as you’re not going to abuse the system. However, if you’re considering an offshore account for your retirement or another means to grow your funds, you may need an international account that supports multi-currencies especially if you're going to have an account in a foreign country.