What's the Point of an Offshore Bank Account?

Sigh – when I’m asked what I do for a living I’m then asked the ‘isn’t offshore banking illegal?’ question - having answered that I’m usually asked ‘so what’s the point of an offshore bank account?’ - because having pointed out that there is nothing unethical or illegal about opening an account offshore and that not everyone who ‘goes offshore’ does so to evade taxation, people seem to wonder why on earth anyone would want to bother with an offshore bank account in the first place!

It’s funny how the offshore world still seems to be synonymous in many people’s minds with shady dealings, fugitive tax exiles and crime - when in actual fact by simply opening a bank account in a country other than the one in which you’re currently resident - like you might do if you own a holiday home abroad for example - means you’ve effectively ‘gone offshore!’

So if you’re wondering what’s the point of an offshore bank account and whether you could actually effectively use one, read on to find out more…

As stated, an offshore bank account is one opened in a jurisdiction other than the one in which you’re currently resident – although usually one considers an account opened in a low tax jurisdiction to be a ‘proper’ offshore bank account – so the Cayman Islands or the Channel Islands are more likely to be synonymous in people’s minds with offshore banking than Spain or Mexico for example. But in actual fact, Spain and Mexico are just as likely to be used by non-residents for banking purposes as any because many people open accounts in countries where they have a second home, where they holiday frequently or where they regularly work.

Just think about it - if you’re considering buying real estate abroad or you often travel to a given country for work or leisure breaks it may make sense for you to consider opening a bank account locally so that you can set up standing orders and direct debits for things like your water or electricity supply for example, or so that you can have funds available for a local transfer when you want to do a bit of shopping or sightseeing.

Other people expatriate and go to live or retire abroad and some of the countries they choose have different banking laws or rules and regulations that restrict the individual so much that they decide to keep the majority of their money elsewhere where they can access it easily for example - or where they can reduce the amount of taxation they have to pay out on interest earned maybe.

Some people who live and work abroad end up in countries which are politically or economically unstable – for people such as this it makes no sense to keep their money in a local bank account and in a local currency no matter how much interest they are offered!

Again, in such an instance as this it makes far more sense to have an offshore bank account that is safely protected by international banking insurers and strict local laws in a robust and respected jurisdiction like the Isle of Man for example, rather than in a country where austerity is a possibility or the closure of XYZ Bank Limited would result in the loss of all an individual’s funds with no chance of recompense.

So, if you fall into any of the above categories it’s highly likely that an offshore bank account could be of benefit to you. However, you have to consider your options relating to which jurisdiction, which bank and which offshore bank account type before you move your money, and remember – non-disclosure of offshore funds could land you in a whole heap of trouble! Get advice if you want to get it right.

Rhiannon Williamson writes about offshore saving and investing as well as offshore banking and her website http://www.shelteroffshore.com/ is full of simple, accessible and useful tips, tricks, articles and reports about making the most of your money and protecting your assets and your financial future.