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Offshore Banking
Offshore banking involves placing money in
an account outside your home country. For
U.S. citizens and permanent residents, there
are perfectly legitimate reasons for doing
so, including:
- Your primary residence is abroad or you plan
to make it so. Alternatively, your home is
in the U.S., but you spend extended periods
of time in other countries, for business
or pleasure. In all these cases, having sufficient
access to your money while abroad may require
establishing relationships with financial
institutions that have a presence where you
will be.
- You live in the U.S. and your search for
legitimate investment opportunities brings
you to consider accounts that are not available
here. International diversification, including
the holding of financial assets denominated
in currencies other than the U.S. dollar,
is the chief motivation in this scenario.
The Internal Revenue Service requires all
U.S. citizens to pay taxes, regardless of
where they live and regardless of where their
income originates. Holding an offshore account
in an attempt to evade U.S. taxes is illegal
and risks civil or criminal penalties. In
particular, opening an account in a jurisdiction
that is viewed as a "tax haven"
by the IRS should be undertaken with extreme
care, even if you have entirely legal purposes
in mind. It is advisable to consult a tax
attorney with expertise in offshore investing
before opening any offshore account.
The concept of "tax haven" can
be elastic, since certain higher-tax countries
actually view the U.S. as one. From the IRS’
viewpoint, a tax haven is generally a jurisdiction
that offers financial secrecy laws in an
effort to attract investment from outside
its borders. These secrecy laws are attractive
to people who are trying to hide assets and
the income from them
Be extremely wary of scams, which
are rife
in the world of offshore investing.
Unknown
financial institutions, operations
in countries
without established banking systems,
and/or
offers that sound too good to
be true should
raise red flags. Be prepared
to do a lot
of homework. Lean towards dealing
with major,
established financial institutions,
especially
those with long track records
of above-board
operations in developed countries.
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