An offshore bank is a type of bank, which is placed or situated in any country other than the country of the depositor. Offshore banks frequently enjoy tax haven, which offers legal and financial benefits.
The benefits usually contain the following:
Tax havens (small or zero taxation)
High level of privacy
The rules and regulations are relaxed or flexible in nature
Comfortable accessibility of deposits
Safeguards from local financial or political imbalance
The term offshore bank has originated from Britain (Channel Islands). At present, the majority of offshore banks are based in island countries and the term offshore bank is applied to denote those banks irrespective of any situation.In legal terms, the personal assets held by an individual and the interest or cash flow from these assets are taxable under personal income tax.
Following are some additional advantages offered by offshore banking:
Offshore banks offer the accessibility to economically and politically steady territories.
A number of offshore banks can function on a smaller expenditure basis and may offer greater interest rates in comparison to the legal rate of interest prevalent in the domicile nation because of lesser operating costs and absence of government interference.
In addition to tourism, offshore bank financing ranks among a small number of enterprises, where there is a scope for geographically isolated island countries to participate in a competitory level. It is quite helpful in case of developing countries.
Offshore banks pay interest, which is commonly not subject to tax deduction. This is beneficial for a number of people.
A number of offshore banks provide banking facilities that are not provided by domestic banks. Examples are risk-based loans with lower or higher rates of interest, anonymous bank accounts, and chances of investing not present anywhere else.
Offshore banks are frequently associated with other forms, for example offshore trusts, offshore companies, and offshore foundations. These carry particular tax benefits for a number of people.
It is noteworthy that offshore banking is not always private. Offshore banks offer a comprehensive range of financial products and services to their customers.
The products and services of offshore banks can be categorized into the following types:
Accepting of deposits
Electronicand wire funds transfers
Investment custody and investment management
Trade finance and letters of credit
The offshore financial centers present all over the world include the following:
British Virgin Islands
Channel Islands (Jersey and Guernsey)
Isle of Man
Saint Kitts and Nevis
Turks and Caicos Islands
Cayman Islands and Switzerland are regarded as the principal offshore banking centers of the world.
Last Updated on : 1st July 2013