Offshore banking is a popular form of holding or storing money in a foreign country. There are loads of plus sides to offshore banking, such as better privacy for your money and immunity against political or financial insecurity. Offshore banking was originated in the Channel Islands, and the majority of offshore banks are located in island nations. Yet the term is also used to refer to financial institutions in countries like Switzerland, Andorra and Luxemboug which are not surrounded by water but hold greater immunity to the countries around them.

Not surprisingly, due to being located in tax-friendly countries or islands, offshore banking is frequently equated with tax escape. However, capital that is stored in an offshore bank account is not in all cases immune from income tax. The same goes for interest retained on the money in offshore bank accounts. Unless you have special dispensation , you in all probability are required to pay income tax on the interest you gather regardless of where that money is stored – here or overseas.

If you reside in a country where there are any political problems, or there are public tensions, it can be precautionary to store your money in an offshore bank account. By retaining it in a local bank account you might be in danger of the funds being removed, frozen or ending up without worth. An additional plus point is that lots of offshore accounts provide superior rates than in the country of residence and there might be fewer running costs involved. You might additionally be able to get a confidential bank account which your traditional bank might not be able to offer. So far it seems as though offshore banking has many advantages, so what are the drawbacks?

One aspect that might be less attractive to a prospective customer is the fact that the cash sitting in an offshore account might actually be less secure. This can be seen in the financial downturn of 2008 -9, where funds sitting in offshore checking accounts in Iceland was lost. Yet if the bank in question offers a decent compensation scheme, this may recover some of the lost funds in case of a serious financial loss. Another downside to offshore banking is that it is regularly geared primarily at people with more significant earnings. Many such bank accounts do carry high running costs so they might only be worthwhile for you if you do receive a healthy salary. However, lots of them do give savings options which can be utilized by individuals with regular incomes as well.