Why Use Offshore Banks?

Why Use Offshore Banks?

By: Frank Vanderlugt

Offshore banks are often talked about in business circles. But what are offshore banks and why should you use one?

The term "offshore banks" originated in the United Kingdom. This was because the Channel Islands (Jersey, Alderney, Guernsey and others. These islands also gave names to breeds of cattle), while being officially part of the UK, had separate tax laws. It didn’t take long for people on the main island of Britain to realise that they could deposit their money in bank accounts based on the Channel Islands and thus have their finances subject to the tax laws of that island.

This is one of the reasons that offshore banks are still popular today. By having funds (wages, earnings, etc) paid directly into offshore banks, this means that the income is "earned" in that country (because that’s where the transaction takes place), and so that income is subject to the tax laws of that country. It’s easy to see that offshore banks in countries with low tax rates will be very popular. These countries are known as tax havens.

Offshore banks are also used during times of political instability. It is well known that during times of political unrest that banks can collapse and that assets may be seized by a rogue government. A case in point here is what happened recently to white farmers in Zimbabwe – the Mugabe government seized their land and drove the owners off it. No recompense, nothing. If you have funds tied up in offshore banks, this won’t happen to you.

Countries that offer secure offshore banks for asset protection during political turmoil are countries that have seen much political stability and safety. This means that the offshore banks in these nations are well and truly safe.

Privacy is another reason why people choose offshore banks. If you don’t want agencies to discover what is in your account (for example, if you suspect that a gold-digger has married your for your money and may divorce you in order to get a large share of it), then an offshore bank that has a culture of discretion and secrecy will keep you safe. The most famous of all the offshore banks when it comes to privacy are the banks in Switzerland.

Recently, there have been some legal questions asked about the possible abuses of offshore banks. Offshore banks can be used for illegal purposes such as money laundering and tax evasion – it is well known that offshore banks are used by organised crime rings. However, the abuse does not abolish the use, as the ancient Romans used to say, so offshore banks remain a smart option for canny investors.

Nations that are popular choices for offshore banks include the following: the Bahamas, Barbados, Belize, Bermuda, the British Virgin Islands, the Cook Islands in the South Pacific, Cyprus, Hong Kong, Macau, Panama, Mauritius, St Kitts and Nevis, and Monaco. Not only are these locations with favourable tax laws and political stability (important factors for offshore banks), but they also are great places to visit (oh dear – I’ll have to make a visit there to set up my offshore bank account…)

Frank j Vanderlugt owns and operates http://www.off-shore-banks.com 2 Offshorebankscom

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