The Benefits of Banking Overseas
The benefits that overseas banking poses are dependent on whether the account holder is an individual or a corporate client. The main advantages of banking in another country are the following;
- International banks provide access to politically and economically stable jurisdictions. This may be an advantage for those residents in areas where there is a risk of political turmoil who fear their assets may be frozen, seized or disappear for example, during economic crisis etc. However, developed countries with regulated banking systems offer the same advantages in terms of stability.
- Some banks may operate with a lower cost base and can provide higher interest rates than the rate in the home country due to lower overheads and a lack of government intervention.
- International banking finance is one of the few industries, along with tourism, that geographically remote island nations can competitively engage in. It can help developing countries source investments and create growth in their economies, and can help redistribute world finance from the developed to the developing world.
- Interest is generally paid by overseas banks without tax deducted. This is an advantage to individuals who do not pay tax on worldwide income, or who do not pay tax until the tax return is agreed.
- Some banks offer banking services that may not be available from domestic banks such as anonymous bank accounts, higher or lower rate loans based on risk and investment opportunities not available elsewhere.
- International banking creates additional tax and banking competition and is an advantage to the industry as tax competition allows people to choose an appropriate balance of services and taxes.
The majority of people who open an a bank account fall into one of the three following general categories:
- High net worth individuals – these are people with a disposable income in excess of one million US dollars.
- Expatriates – these are people who are located overseas away from their home country either on an employment assignment or in retirement.
- Business owners – generally these are individuals who own companies whose shares are owned by family members or a close working partnership.
The ‘type’ of person who falls into the above three categories range from those with inherited wealth to those who have earned it by themselves and they all utilize international banking for the following benefits: taxation planning, estate planning, pre-immigration or repatriation planning, privacy and asset protection.
There are far more corporate clients with international banking needs than individual clients. They fall into one of the following categories:
- Multi-national corporations.
- Large industrial and trading companies.
- Shipping companies.
- Financial services and banking institutions.
The benefits of banking overseas for such companies are diverse and range from the fact that a large number of companies actually outsource parts of their operations overseas and require accounts in these countries to the fact that many international jurisdictions have tax free zones through which companies can operate all or part of their operations tax effectively.
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