The very word ‘offshore’ in the realm of finance immediately conjures up images of shady backroom deals, involving high amounts of money and international tax havens. A certain amount of immorality surrounds the concept of offshore banking.
However, there is nothing illegal about offshore banking when done legitimately. For many, it remains the safest and most beneficial way to manage financial assets and to prevent over-taxation practices in their home country.
Why has the term ‘offshore’ been tainted?
Let’s begin with the illegal element of offshore banking. If a person holds wealth, assets or property offshore without declaring it to the relevant authorities in their country of residence, then this will most likely be classed as illegal activity.
Reporting of taxable assets is a personal obligation in all countries, and so, failure to report assets and attempting to claim ignorance to tax laws is not a suitable excuse for any evasion attempt. A person’s obligation to report remains absolute.
So, if for any reason you are considering moving assets or wealth abroad without declaring to your relevant tax authority, STOP! By doing so, you will immediately be in breach of laws in both your home country, as well as the host country.
So, under what circumstances it is legal?
Offshore banking can be completely legal and legitimate, and there are many reasons that individuals may wish to utilise offshore accounting methods. This could stem from having little faith in the domestic banking industry or political system. Another motive could be for those individuals who can legitimately avoid certain taxation requirements in their home country, and as such choose offshore banking.
Clearly then, banking offshore is a sensible option that is available to almost anyone, so long as the assets that are placed offshore are correctly declared to the tax authority in the home country.
Will offshore banking ever be illegal?
The very nature of the global, market-led economy in which we live means that the transfer of assets across national boundaries will never be illegal. If the transfer of assets was suddenly deemed illegal, much of the world’s economic activity would grind to a halt.
Clearly then, offshore banking can be an entirely legitimate and legal process. It is carried out on a regular basis by the world’s governments and organisations, as well as individuals. For this reason it will not suddenly become an illegal activity, and in terms of protecting your hard-earned money from unstable domestic conditions or unfavourable taxation policy, it can often be the obvious choice.