Most people believe that the idea of offshore is some form of illegal or corrupt banking practice designed to avoid or evade tax. The truth is that banking offshore is, in reality, a means of using the world’s banking market to place money (or other assets) for an improved return.
Of course, very wealthy people are the majority of those who take advantage of this as they have greater means and advice to achieve this. However, the threshold for a simple savings account in many financial centers is relatively low.
So what’s the risk? The risk entirely depends on the provider you choose. There are many great providers in the developing world for example but unless you have some personal knowledge of the company you should take into account the regulatory framework of the host country and if it is not strong, then perhaps look to more fully developed states. More evolved regulatory jurisdictions will offer stronger rules for the providers to work within and even mandatory and approved dispute resolution schemes. To make your choice, look into the company’s website – is it owned by a larger firm, does it clearly show the profiles of the management, do they communicate clearly, do they have a real office in the country in which they are based etc etc ?
For most of us then, an offshore account is available and there is no better time to find one. Worldwide interest rates are low and most of our local banks are offering such low rates on deposits that we, when taking inflation into account, are losing money when we place money with them. Offshore savings accounts generally earn us higher rates of interest and they generally pay out interest free of tax which means that we only pay tax on it once annually which allows for compound growth on the tax throughout the year.
Tax is always a big question for new offshore savers. Saving offshore does not preclude us from paying tax on the interest. One is obliged to declare such accounts to local tax authorities in your annual return. The actual advantage is that one does not pay it until it is called for by the authority and therefore it continues to compound and make money in the interim.
Remember, the big win for offshore savers is the interest rate – some detailed research can find you rates as high as 8%. To conclude, saving offshore can be simple and very rewarding – it is accessible and you can easily benefit from it.