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Holding an account in your name in a country other than where you live is legal. Governments, companies and individuals use offshore accounts for the everyday purpose of transferring money across the globe. (Many high street providers offer offshore banking services.)
It is not legal, however, if the owner of such an account fails to declare savings to HM Revenue and Customs. While a large amount of people with offshore accounts can make tax savings, the ones who do so legitimately are usually UK expatriates living in low taxation countries. It is not legal for UK residents to save money with an offshore bank account.
According to a survey compiled by Alliance and Leicester, 92 percent of expats are using online banking facilities. The showed internet banking is gaining in popularity with expats after a survey revealed that nine out of ten use internet banking, however, “only a third is opting to open an offshore savings account”.
Simon Hull, Managing Director of Alliance and Leicester International comments: “With internet access now so readily available, offshore consumers should take advantage of internet banking and saving. As well as offering speedy transfers and an up-to-date snapshot of your finances, the offshore banking and savings market is quickly developing many of the online facilities already available from its onshore counterparts.”
Having an offshore bank account allows people to:
Note: Your personal circumstances as well as the type of offshore account will affect your eligibility to save on taxes. This combined with the jurisdiction of the country you choose to bank in makes each case unique. Debts advises you do lots of homework prior to opening an account overseas.
Reasons for opening an offshore bank account include:
The benefits to be derived from offshore banking vary enormously in line with the jurisdiction of any nation. Not all nations with taxation benefits, ie inheritance tax, income tax etc, are ‘tax havens’. A tax haven is a state where taxes are levied at a low rate or not at all.
The following jurisdictions could be considered to be “market leading” jurisdictions for various reasons:
Bahamas – used to be the dominant force in the offshore financial world, but lost favour after independence in the 1970s.
Bermuda – a market leader for captive insurance, and also has a strong presence in offshore funds.
British Virgin Islands – has the largest number of offshore companies.
Cayman Islands – has the largest value of AUM in offshore funds, and is also the strongest presence in the US securitisation market.
Gibraltar – not dominating the offshore market in any particular specialisation but retains a strong presence in most fields.
Jersey – a dominant player in the European securitisation market and the European REIT market.
Luxembourg – a market leader is UCITS and is believed to be the largest offshore Eurobond issuer.
Panama – which is a significant international maritime centre. Although Panama (with Bermuda) was one of the earliest offshore corporate domiciles, Panama lost significance in the early 1990s
The above list is only a small portion of the number of offshore financial centres available, however, they are considered to be the key players.
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