What are The Main Benefits of Offshore Banking?
Diversification of investments internationally
Diversification is key in wealth management. Investments in an individual’s home country are subjected to various regulatory, geopolitical and social conditions that are beyond the individual’s control. Offshore Banking allows investors to move some investable assets offshore, where the financial infrastructure, stability and security are beyond that offered by the home country. As a result, the risk of the combined investments is reduced.
Favorable tax environment
This is one of the main reasons for banking offshore, especially if the offshore bank is in a “tax haven”. One of the benefits is that an offshore bank account could be set up in a country of lower tax jurisdiction than that of their home countries. For countries which do not tax income earned outside of home countries, an additional advantage for investors would be that investment interests paid by offshore banks are non tax deductible – which is advantageous to investors who are not taxed on international income.
Heightened banking confidentiality
A major advantage promised by offshore banks is the privacy of its client’s financial matters. Almost every offshore bank is established in a jurisdiction that promises to provide a higher than usual level of financial privacy into the affairs of their clientele. In most circumstances, these banks are under no obligation to reveal details of clients’ investments if requested by their home countries.
Access to foreign investments and products
Offshore banks are well-positioned compared to local banks in that they allow investors to gain access to banking products that may not be available in their country of residence. For example, in a local market, Foreign Exchange (FX) products could be limited, but in another country a wider range of FX products could be available, especially if the market is very sophisticated in FX.