Is Offshore Banking Legal

One of the most frequently asked questions of us here at Shelter Offshore is: -
‘is offshore banking legal?’
Well, to simply answer this question would result in a very short examination of the question because the short answer is just ‘YES’!

Not only is offshore banking legal but it will always remain legal, not only is offshore banking legal but it can be of benefit to almost all of us - even US, UK and European citizens.  What is not legal however is the use of offshore banking for tax evasion purposes, and it is this perceived fine line that worries many people…

This article explores the features and benefits of offshore banking and it explains why it remains a legal process and how to avoid accidentally evading the legal taxation requirements of your government.

First things first - what is offshore banking?

The term ‘offshore’ comes from the British Channel Islands which are tax havens physically located offshore from the United Kingdom, but the term ‘offshore’ nowadays is applied to all tax havens worldwide whether they are island nations or not. 

In fact, in terms of banking offshore, simply moving your money from its country of origin and your country of residence to a bank in another jurisdiction, whether that be a tax haven or not, is construed as banking offshore.

And it is this very fact that forms the fundamental basis as to why offshore banking is and will always be legal. 

Individuals, small companies, large corporations, multinationals and even governments all have requirements to move money around the world, if they were restricted from doing so the entire economies of the world would grind to a halt. 

Or to look at it another way - on the one hand you have an individual who, in order to buy something off eBay in another country has to use their paypal account to move money overseas and on the other hand you have a government that is involved in the import and export of its nation’s goods needing to transfer financial assets overseas. 

Both make use of the fact that moving money around the world is a legal and normal everyday process.  Placing money in an offshore bank account is simply moving money around the world - it too is a legal and normal everyday process.

So you see, no one can stop you taking money out of your country of residence and either saving it or spending it elsewhere.  Therefore by its very nature, banking offshore can never be made anything other than legal!

As mentioned, what is NOT legal about banking offshore is tax evasion.  By taking money out of your country of residence or by earning it overseas and never remitting it to your country of residence and then never declaring it is usually illegal depending on the country in which you are resident and your tax status. 

In the US for example the federal government place a requirement on all citizens liable for US income tax to declare all taxable assets wherever in the world they are located.  If you fail to do so you are committing a criminal offence.

With that little matter cleared up, let’s look at how offshore banking can actually be of any benefit.  After all, if US citizens are unable to save tax via offshore banking how can it be of use to them?  And if UK citizens and European citizens suffer the same reporting restrictions as their US peers how can it benefit them either?

Well, there’s more to offshore banking than simply saving tax!

It’s true that if you expatriate for a given period for example, you may be able to save tax via the use of an offshore bank account.  And it’s true that multinational companies can alleviate their international taxation burden through the clever utilisation of a network of offshore bank accounts and IBCs.  It’s also a fact that many countries in which you can bank do not charge you tax on income you earn elsewhere and bring into that country, nor do they tax you on interest earned on your account.

But for the majority of us, saving tax using an offshore bank account is the very least we can get out of banking offshore.

We can however: -

- Maximise our account activity privacy
- Protect our financial assets from litigious claimants
- Benefit from more attractive account structures and interest rates
- Benefit from global access to funds
- Bank in multiple currencies
- Have access to global business opportunities
- Bank in an economically and politically stable jurisdiction if we reside in a country that has a corrupt banking system or is presently less than stable

And for these very benefits alone it’s sincerely worth investigating offshore banking for your own specific purposes. 

If you want to know more about banking offshore in any specific jurisdiction or you have a general requirement for an offshore bank account, get in touch via our offshore advice form and we will do our best to assist you.