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The 7 benefits of offshore banking

By Sam Instone - March 22, 2022

As a senior international professional, you know that 'offshore' simply refers to any (business) activity that takes place outside an entity's home base.

In finance, the term simply describes areas where regulations are different from your home country.

It's likely you have moved your personal finances or business offshore for more favourable conditions.

Below, we explore those a little more. 

Offshore banking is common for companies and high-net-worth individuals (HNWIs).

You may also choose to bank and hold investments in a specific country offshore if you travel there frequently.

Offshore locations are generally island nations, where entities set up corporations, investments, and deposits.

Specific locations that have become popular for offshore business activity are island nations like the Cayman Islands, Bermuda, the Channel Islands, and the Bahamas.

Other centres in landlocked countries, including Switzerland, Ireland, and Belize, also qualify as popular offshore financial centres (OFCs).

The level of regulatory standards and transparency differs widely among OFCs.

There are many benefits to offshore banking, ranging from peace of mind (no one will care about your money as much as you), security, privacy and a personal level of service.

Generally, the 7 main benefits of offshore banking are:

  1. Security and protection of your capital, especially during times of instability
  2. Privacy and service levels
  3. Convenience and accessibility to funds
  4. Favourable tax laws leading to savings on deposits, savings and investments
  5. Access to international investment opportunities
  6. Preferential foreign exchange services
  7. Superior lending, leveraging and credit facilities

Let's explore each benefit in detail.

1. Security and protection

Your or your company can use offshore accounts to avoid the unfavourable circumstances associated with keeping money in a bank in your home nation.

By using an offshore bank, based in a highly regulated, transparent jurisdiction, such as the Isle of Man for example, you can feel secure that your money is safe.

Holding offshore bank accounts makes it more difficult for them to be seized by authorities.

Remember what happened in Cyprus in 2013?

Expats were suddenly blocked from taking any money out of their accounts and out of the country.

By banking offshore, you remove your wealth from threats such as these. 

2. Privacy and service levels

One of the attractions of having your accounts held outside your home country is the privacy you get.

Bank secrecy in some countries like Switzerland and Singapore is a legal entitlement, and banks cannot disclose details of their account holders or assets, except in extreme circumstances like a criminal investigation.

This has led to widespread tax evasion, but many banks and governments have moved forward in recent years to ensure all money upon which tax is due is declared, and new anti-money laundering rules are in place.

And as well as complying with these robust standards, expats may still be able to enjoy more privacy from an offshore bank than they can from an onshore one.

Around the clock help if something goes wrong, with access to telephone and online banking 24 hours a day, 7 days a week, 365 days of the year - usually come as standard.

3. Convenience and accessibility

As an international professional, being able to keep your bank account in one place, no matter how many times you move countries, is a major benefit.

In fact, this reason alone is enough for many people to open an offshore bank account.

4. Tax planning

There can be expat tax advantages to using an offshore bank - but whether these apply in your case will depend on your personal circumstances, such as country of residence.

Also, some account holders who bank in jurisdictions like the Isle of Man and Jersey, for example, can choose to receive interest on their savings tax free.

The interest is credited gross to their account, which means there is no income tax deduction at source.

As an expat, this removes the need to reclaim tax paid, and avoids the hassle of reconciling your tax returns to ensure you are not over-paying tax.

An offshore bank account can also be useful when it comes to estate planning.

In many countries, local law will dictate what happens to your wealth if it is held in a local bank. Offshore banks solve this problem.

For example, in places like Dubai, Abu Dhabi, Qatar and Riyadh in the Middle East, if you were to pass away, Sharia Law would be applied to local accounts. 

This would mean that such accounts would be frozen until probate is granted, which in some cases, could take years.

So, if you work in one of these countries, banking offshore is a good idea for estate planning purposes.

5. Investing offshore

Offshore investing is common for high-net-worth individuals.

A good offshore bank will provide you with a wide choice of funds and investments that are not usually available either in your home country or where you are currently living.

However, select your bank carefully, some just white label other's solutions and offer poor choice.

Read our reviews of popular offshore banks here

Don’t forget you will need to think about what the purpose of investing is, how long you want to invest for, how much risk you are prepared to take with your funds and what fees and costs are involved in running an investment portfolio.

6. Preferential foreign exchange services

For those who work internationally, the ability to save and use funds in a foreign currency for international dealings can be a benefit. 

With multi-currency accounts usually coming as standard, transferring money between accounts will be fast and free.

And, if you need to transfer money between currencies, some offshore banks provide a competitive foreign exchange rate, compared to a regular banking service.

This is one of the biggest advantages of offshore banking facilities for expats with international financial obligations.

7. Lending, leveraging and credit

Once your new banking arrangements are open, you will often be able to apply for a mortgage or lending facilities.

The best offshore banks will usually be flexible in their lending arrangements, and you will often find competitive mortgage rates available for property, particularly if buying in a mainstream market like the UK.

An offshore bank might be a suitable solution if you're interested in: 

  • Flexible and easily accessed consolidated structured lending.
  • Floating interest rates linked to the prevailing prime rate, fixed interest rates or forward fixed rates.
  • A service catering for individuals, trusts, close corporations and companies.
  • The option of multiple sub-accounts for multiple assets or personal administrative and/or debit order requirements.
  • Commercial property finance.
  • Finance of selected property development projects.
  • Equity-geared lending.
  • Preference share lending.

Offshore banking will not be right for everyone. 

The benefits and tax rules associated with offshore banks highly depends on your circumstances. 

Download our free guide if you'd like to know more about how high-performance execs build on their £1 million+ portfolios, or contact us for comprehensive financial planning advice and a discussion of your banking options.

How high-performance execs build on their £1 million+ portfolios