When it comes to offshore banking, people always have some misconceptions in their mind. Many would say that it is illegal; many would say that it is difficult and expensive to setup; many would suggest you to stay away from offshore banking for one reason or another.
Well, if you are considering to open an offshore bank account, this article can help shedding some light for you.
Our friends at ICO Services – one of the leading international corporate service providers shares some of the most-common misconceptions about offshore banking, as well as the truth behind them:
Misconception #1: Offshore banking is illegal
This is the number one misconception about offshore banking. Unfortunately, this is an earned reputation. How so? Let me explain.
The sad truth is, due to the private nature of offshore banking, some people are using it for illegal purposes, such as money laundering. Here’s the real truth: Most people are using offshore banking for protecting their assets legally. In fact, large, well-known companies are using offshore bank accounts.
If you can better-protect your asset in a more stable jurisdiction, and legally enjoy the tax benefits of doing so, then why not?
If you are saying, “Offshore banking is for criminals!” then you may very well say that coupon clippers are criminals, too! They creatively collect coupons so that they can spend nearly zero when shopping for groceries. Is it illegal? No. They just use the available ‘tools’ to save money.
That’s what people do when opening an offshore bank account: They want to use the available ‘tools’ to save money – legally – and more other benefits, such as asset protection and guaranteed privacy.
Misconception#2: Offshore banking is for tax evasion
Before we argue on this, let’s start with a statement: Tax evasion is not the same thing as tax saving.
Tax evasion means you avoid paying what you should be paying when it’s required by the laws. Tax saving means you avoid paying more than what you should, as the law permits.
Tax evasion is illegal. Tax saving is not. Agreed?
Using the coupon clipping example above, using coupons doesn’t mean you steal from the supermarket! Using coupons mean you can save – a lot- by playing by the rule stated in the coupons.
Misconception #3: Offshore banking is only for rich people
Of course, there are some perks that can be enjoyed by those with larger assets, especially in term of offshore private banking, due to the costs of establishing and maintaining the accounts. However, it’s not a requirement.
It’s also true that some jurisdictions – usually the more established ones – are for those with minimums to start with, e.g. Switzerland, which requires a minimum opening deposit of 10,000 USD/EUR/CHF. But here’s the good news: Most jurisdictions are accessible for the Average Joe, John Smith and Tom, Dick and Harry of the world.
Alternative jurisdictions, such as Ras Al Khaimah (RAK), St. Vincent and The Grenadines and Cyprus requires as low as USD 500 as the minimum opening deposit requirement.
Misconception #4: Setting up an offshore bank account is a difficult, lengthy and expensive process
This is a total misconception. Indeed, it WAS expensive, but not today. Using the services of reputable companies like ICO Services, you can set up an account in the hundreds of dollar.
Of course, for business purposes, you need a company formation services, which means there will be additional fees for setting it up.
Requirements-wise, it’s just like opening a typical, non-offshore bank account. For a personal account, you typically need a passport copy, proof of address, bank reference letter or statements. For a business account, you need more documents, such as the certificate of incorporation, register of directors and shareholders and so on. Again, this a typical requirement for opening any types of bank account.
So, how long is the process of opening an offshore bank account? Well, it’s not weeks: In about 48 hours, you can have the account set-up and ready to use.
Misconception #5: You have to travel to the offshore bank to open an account
No, no and no. Again, this is old school. The new-school offshore banking account setup doesn’t require you to travel for opening an account.
You can DIY things by submitting the requirements by mail, or even better, you can user services like ICO Services to help you out.
Of course, you can always travel to the offshore bank location if you like. It’s not a requirement, however.
Just like your other personal or business endeavors, you need to consider your options before you open an offshore bank account. You need to make sure that what you know is based on facts, not on assumptions. There are so many misconceptions surrounding offshore banking, and believing in those misconceptions might hinder you from a great way to better manage your personal/business finances.
You need to ask this question to yourself: Why do you need to open an offshore bank account?
If you want more privacy with your account, protection against local political/financial instability, and tax benefits, offshore banking may be a great solution for you.