Is It Worth Getting An Offshore Bank Account?
Well, if you're just starting out, probably not. If you're solely dealing with clients in your own country, definitely not.
An offshore bank account is just a bank account in another country. They've gotten an exotic reputation due to Hollywood. The reality is banks in sweaty jurisdictions being compelled in five years to fork your 'private' details over to your country's tax authority. They're often not very confidential at all; the US can strong-arm most.
Offshore bank accounts are for the wealthy who can live anywhere they want. Their native government can't threaten them because they have assets abroad, beyond their reach. Their host country can't either, as they can move out in a week, and these little havens need all the money they can get!
Still, they try.
There's a big scandal every few years because Mr. Big got too greedy and the Guardian newspaper went to town on him. There's an investigation, the realities of international finance sink in, a minion or two is sacrificed and the Game goes on.
The danger of offshore banking is that someone running a local business may be tempted to evade tax. Notice I said evade, not avoid. Tax evasion, by definition, is a crime. Your local tax law says X and you ignore it. Tax avoidance is legitimate; you manage your affairs so that you do not incur taxes.
A simple example is a big company that realises that it could just as easily be registered in Ireland than in New York. Its business is international. It doesn't need a US base. It would save millions by doing this. So it does.
Are there any benefits to a small businessman in having an account abroad? Yes.
1. Spreading Risk
The last financial crisis taught a lot of UK depositors a hard lesson; your money is not as secure as you think. Big banks can go bust.
UK banks are backed by the government, but it's currently making manoeuvres which suggest All Is Not Well. A lot of the world seems to be running on debt. So, if one has a lot of cash, one shouldn't put it all in one place. A high-interest deposit account in Switzerland or Singapore is an obvious option.
2. Currency Exchange Savings
If your customer can pay you in Euros in an EU country, this can save a lot of money in transaction fees. You also have a hedge against currency fluctuations; if sterling goes down, the dollar may go up, and vice versa.
You can also make local purchases with your local debit card.
3. Avoiding Litigation
It's a fact that wealth attracts robbers the way honey attracts bears. Average Joe doesn't know what Hell on earth is until a customer, colleague or spouse takes him to court. Nobody sues a poor man. You may be surprised at how vicious and selfish people become when they smell money.
The risk of litigation drops off a cliff if your money is inaccessible. Lawyers tend to be smart people, but not always. They're not going to take on a no-win, no-fee case from some chancer if they find out the money's in the Caymans.
4. Surfing Politics
Countries can crumble. They get a left-wing government which thinks it can ignore capital essentials and soon the local peso is trading at 500 to the dollar. Spread the risk if you can afford to do so.
So, if you want such an account, how to get one?
Go direct to the bank.
There are middle-men advertising on the web, but they have an air of ... ethereality. Google banks in Switzerland, Singapore, and Isle of Man etc. and then send them an email. Read up on the latest offshore news. Avoid banks in second-rate nations; it's more likely they'll go bust or local crooks will leech your account. Government-backing of banks in Eastern Europe or the Carribbean may not be worth much if the nation itself is a basket-case.
Looks for reviews of the bank. Go in person to set up your account. If you have any butterflies in your gut, any niggling doubts, stop.
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