What is an Offshore Bank? – An offshore bank is a bank that is licensed under the appropriate offshore banking legislation. Regular onshore banking accounts are subject to the tax rules, foreign exchange rules and charges of whatever country the account is in. These bank accounts are also subject to foreign exchange regulations and are not covered by the offshore banking confidentiality and asset protection legislation. By the contrary, offshore banking is tax free, there are no foreign exchange regulations, and all account information is confidential. Therefore the offshore investors obtain greater freedom than is possible with onshore banking.

Onshore banks suffocate individuals and institutions alike with complex regulations. Others go offshore to simplify international trade. Individuals and businesses seek privacy. They want bank accounts in jurisdictions where it is a felony for a banker to reveal that they even have an account! By contrast, there is zero financial privacy in Europe and America . In addition, many go offshore for tax benefits. Some locales have zero income tax, zero inheritance tax, and zero corporate tax.

• To increase personal privacy.
• To increase investment diversification.
• To protect yourself from invasive bureaucracy.
• To protect a percentage of your profits from capital taxes.
• To protect against frivolous lawsuits.
• To protect your assets from seizure.
• To protect capital gains from capital gains taxes.
• To assist estate planning.
• To preserve your assets for your heirs.
• To protect a percentage of your income from income taxes.
• To delay any taxation.

Care should be taken to structure the offshore account so that the assets are not included on the balance sheet of the protected client. A properly crafted asset protection trust should do this since the protected client is not treated as the owner of the account under traditional accounting rules provided the account is in the name of the trust (I have seen opinions on this from major accounting firms). Note, the offshore account should never be in the individual name of the client.

The asset protection advantage of these offshore bank accounts is the anonymity of the accounts. For example, it sometimes makes sense to form a tax exempt entity to hold the protected assets. The stock in this tax exempt entity can be held by an asset protection trust. As a result, the stock does not show up on the balance sheet of the taxpayer and the income from the assets is likewise off the tax return of the protected client.

A secret bank account must not be utilized to hide money from the IRS. It is simply a good and effective tool to keep assets out of the hands of creditors.