There’s a commonly spread myth that, when combined with the financial services industry, the term ‘offshore’ applies to illegal activities. Governments, via the media, subtly promote this myth because they actually prefer us all to keep our money onshore and fully visible. They like to know where we are and what we’re up to at all times.
You may have read the recent headlines about the abuse of tax havens costing the British government billions of pounds annually, but this is just another example of how the offshore world is misrepresented in the media. Of course there are those who exploit the likes of offshore bank accounts – but don’t let that lead to a blanket clamp down on offshore banking.
As we will explain clearly today, offshore banking isn’t just for the rich, and going offshore isn’t in any way illegal or immoral if you’re an expat looking for the best ways to manage your money.
First – a Word About Tax Haven Abuse
For the record, at Expatra we do not condone or promote tax avoidance or evasion – we always make it clear that every individual has a reporting requirement when it comes to his or her taxable activity. Therefore, when massive corporations manipulate offshore tax havens for the extension of their profitability, there is justification for much closer inspection of the legality, (or otherwise), of their activities.
The way some companies abuse tax havens is neatly explained in an article in Forbes: “A tax haven finance subsidiary—a paper corporation—is a standard tool for multinational companies, which don’t need bank secrecy. They use tax havens as way stations for money earned in high-tax jurisdictions that they intend to repatriate to their home countries. They don’t keep money on deposit in havens.”
Unlike companies who operate in this way, expats who have offshore bank accounts are not abusing tax havens. They are making use of legitimate solutions for the better management of their wealth. They don’t use havens as a “way station” for their wealth, they use secure jurisdictions for the protection of their money.
Offshore Banking – Not Just for the Rich
Because the wealthy have exploited tax havens for many years (see above), you can easily understand why there is such a strong negative reaction to the term ‘offshore’ when it’s applied to the financial services industry.
Nowhere is this more apparent – and yet wholly inappropriate – than when applied to banking services…
Misunderstanding legitimate tax havens, (a.k.a offshore jurisdictions), has become so common and so damaging however. Even Jersey, Guernsey and the Isle of Man – i.e., some of the most respected and respectable, well-regulated and transparent jurisdictions – have been impacted.
Until just last week all three existed on what was a very damaging list for the locations in question, namely the ‘Secrecy Jurisdictions’ list which formed part of America’s Stop Tax Haven Abuse Act.
This just serves to prove: –
a) How legitimate offshore havens are misunderstood and
b) How this misunderstanding of the entire offshore industry results in a Catch 22 situation, where genuine offshore activity in genuine offshore centres is negatively impacted.
Fortunately Jersey, Guernsey and the Isle of Man are now off the list. And fortunately publications such as our own will continue to educate expats about how they can legitimately benefit from offshore banking.
How Can Expats Benefit from Offshore Banking?
Let’s look at who can legitimately benefit from offshore banking
In a nutshell you can potentially benefit from an offshore bank account if: –
- You’re an expat
- You own property abroad
- You travel widely and regularly for work
- You have business interests in more than one nation
The main benefit of an offshore bank account is flexibility, and anyone who falls into any of the above categories really requires flexible banking.
Concentrating specifically on expats however, here’s how you can potentially benefit from banking offshore: –
You can hold your capital outside the nation you’re living in if you have an offshore bank account – this is a benefit to those who only pay tax on money they remit into their country of residence.
For example, those tax resident in Thailand who earn their income from a pension or who have foreign sourced income only.
This is also of benefit to those who reside in a nation where economic, political or banking stability is questionable, and for whom a secure bank account in a secure offshore haven is therefore a better option.
You can access your funds at any time and from anywhere in the world with the most flexible offshore bank accounts – the majority of offshore or international bank accounts offered by the major banks give customers maximum accessibility.
You can transact online or over the phone, you can access your money from ATMs all over the world, and as a result your money can be as international as you are!
You can have a multi-currency offshore bank account – many expats earn their income in more than one currency, perhaps as a result of a wage and an investment income. Others live and transact day-to-day in one currency, but have financial obligations elsewhere in another currency.
Such expats can be badly impacted by currency fluctuations, transfer charges and an inflexible banking system.
Expats who choose a multi-currency offshore bank account can get around all these issues by having their different monetary obligations serviced under one account number umbrella. This is a massive flexibility benefit.
Expats can do their offshore banking via a well-respected jurisdiction – unlike slippery corporations that allegedly use offshore havens for money manipulation, expats seeking the safest home for their money can choose from the best regulated jurisdictions, where there are deposit guarantee schemes in place.
Could You Benefit from Banking Offshore?
As an expat, if you like the sound of any of the above discussed benefits and you believe an international bank account could be of use to you, explore the advantages of offshore banking based on your own personal circumstances, and be sure to compare and contrast the account offerings available from the leading banks.
Look closely at jurisdictions as well as the bank offering the account, look carefully at the account features and fees, and if in doubt, seek personalised advice from a qualified source such as a financial adviser or accountant. This article does not constitute advice.