Offshore Banking: Is it Legal?
One of the most asked questions about offshore banking is "Is it legal?" The answer is YES it is legal! Offshore banking has become so beneficial to persons and business that it will never become illegal. In fact it has become an indispensable part of doing business in the global marketplace.
The part that is illegal is attempting to evade paying taxes. It is this aspect of offshore banking that most people think of when they hear the term 'Offshore banking". Tax evasion is a misconception brought on by to many TV shows and movies that paint the bad guys as money launders or funding terrorist. I would like to use this small article to take a closer look at offshore banking activities.
The term 'Offshore' got its name from the British Channel Islands, which are tax havens. The Islands are quite literally located offshore from Britain. Thus the name. Today however, the term refers to banking in any other country that you are not a resident of, whether it is an island or not. In fact technically it doesn't even have to be a tax haven country to be considered offshore banking.
It is not now nor ever likely to be illegal to move your money from one bank to another bank, even if the other bank is located offshore. It is not against the law to transfer your money from your home country to another country you are not a resident of. For this reason offshore banking will continue to remain legal.
In the global economy many entities including governments have need to transfer their assets around the world. It doesn't matter if you're just an individual or a large business concern there is nothing illegal about moving your money to another countries bank.
If you think about it, if it were to become illegal to move money offshore the global economy would be in jeopardy. People in America are always purchasing things on e-bay from other countries and visa versa. People from all over the world use companies like Paypal to move funds from one country to another easily and legally.
The fact that import-export concerns move money through different world banks all the time shows that it is a normal activity. Even governments move monies in the same way for similar reasons everyday. Yes offshore banking is an everyday activity and is not likely to change any time soon.
It is banking offshore for the purpose of tax evasion that is NOT legal. Depending on what country you are living in, it is not legal to earn money overseas and not declare it in your country of residence. Of course you will want to check with the tax laws of the country you are a residence in.
Here's a for instance, the government of the US requires all income or assets that it's citizens have received overseas to be declared for tax purposes. This requirement is in effect regardless of where these assets were earned. It is a Federal offence for failing to do this and you could end up doing time in the Federal Penitentiary.
As with many laws there are ways to legally get around them. One such way is to expatriate for a time. Companies who do a lot of international business use IBC's to reduce their tax liabilities. This works because some countries don't levy income tax on funds earned in another country nor do they tax interest income. By setting up their IBC in one of these countries they are able to reduce their tax liability substantially.
This is great for big corporations you say but how does that benefit me the private citizen? Good question. It isn't just saving on taxes that makes offshore banking appealing. Here are a few other benefits to consider by opening an offshore bank account:
Access to your money anywhere in the world Multiple Currency liquidity Able to take advantage of worldwide business opportunities Better account services and better interest rates Litigation protection
Consider if your home country is in political unrest and your currency is at risk. Offshore banking affords you an opportunity to place your money in another political jurisdiction without the risks of your corrupt and/or unstable economic system wiping out your assets. Yes, Offshore banking is here to stay and almost everyone could benefit from using this legal banking alternative.