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Offshore Merchant Banking

Offshore bank is also a bank which is located outside the country of the depositor. This bank has less tax jurisdiction providing legal and financial advantages for depositor.

Majority of offshore banks are based in nations having islands. The offshore banking is majority of times associated with organized crime and underground economy by means of money laundering and evasion of tax. But offshore banks never prevent the assets which are subjected on interest due to income tax. There are some people who satisfy the complex terms, while the several countries allows no difference between the interest earned in banks located in abroad countries and local banks.

The offshore banks will never disclose the right income to tax authorities and have no obligation legally to do so. These banks are protected by bank secrecy policy. After 9/11 attacks in 2001 on World trade Centre, there were many calls for international financial regulation. But the offshore bank defenders have criticised these regulation. In addition to this offshore banking provides a stiff threat to taxation and banking systems in the developed countries.

The advantages of offshore banking are as follows:

Offshore banks will provide access to economically and politically stable jurisdictions. This is a boon for residents where there is a risk of political turmoil. But even the regulated banks in developed countries will offer the same facility.

Some of the offshore banks will operate at low base cost and provide interest rates which are higher than legal rates in depositor’s residential country. This is possible due to lack of intervention from government or low overheads.

Offshore banking finance is one of industry which can engage competitively. It can provide support to source investment for developing countries thus creating growth in economies. It can redistribute the finance from developed countries to developing ones.

In offshore banks the interest is paid without the deduction of tax.

Few offshore banks are offering bank service from unknown bank accounts, providing lower or higher loan rates which will be based on investment and risk factors.

Offshore banks may be linked to offshore foundations or trusts and offshore companies which support specific advantages on tax for individuals.

Offshore banks offer various services including: credit, foreign exchange, taking of deposits, E-fund transfers, trade finance, management of investment, trustee services and corporate administration.

Disadvantages of offshore banking are as follows:

In the past the offshore banks have been associated with crime gangs and terrorist groups.

Offshore jurisdiction is always in remote place where access to information or physical access is very difficult. But in the world of telecommunication it is not a problem as the accounts will be set up via online, mail or by phone.

Offshore banking is easily accessible for individuals with high incomes. So the burden of tax falls on middle class group in developed countries.

The regulation of offshore banks has been improving even though it is insufficient. The standard of regulation is being monitored by international bodies like IMF (International Monetary Fund). These offshore banks are needed to maintain adequate capital according to international standard. At least once in quarter they need to report to the governing body with its current business state. Contact one of our helpful account representatives to assist you in the setup of a high risk merchant account or offshore merchant account for a high risk merchant.