Advantages and disadvantages of opening an offshore investment account
October 31, 2019
Thinking about offshore investment accounts?
When we hear about the offshore investment account, the association with Offshorecitizen.net almost automatically arises. Indeed, until a few years ago, the opening of an offshore account (which technically takes place outside of “its own jurisdiction”) was carried out almost exclusively in those countries that guaranteed a low level of taxation, a poor exchange of information and an impenetrable Bank secret.
Today, on the other hand, with the globalization of financial markets, the meaning has expanded, thus expanding the possibility of opening current accounts abroad, which in turn has made the process less complex, above all thanks to the intermediation of specialized companies act as an intermediary. But it is equally obvious that, in the choice, one prefers to bring one’s own liquidity where one benefits (perhaps even by virtue of specific agreements on double taxation) of privileged treatment, compared to that which one has in one’s own country.
There are two ‘basic’ conditions to be verified in the research process, namely:
- how effectively it is convenient to open an offshore account in a particular country (carefully evaluating the costs to be incurred);
- the type of bureaucratic process to follow, and the possibility of being able to manage relationships at a distance.
Also basic is a ‘reduced’ currency control regime, at least with regard to transactions between non-residents, as well as the possibility of managing all transactions in foreign currency, thus avoiding being subjected to exchange rate risk. But even in this case, the assessment must be made in light of the reason why you choose to proceed with the opening of the account itself.
Which requirements should not be overlooked?
To determine and identify the best conditions that must support the opening of an offshore bank account, the following aspects cannot be neglected:
- Costs: the difference can be significant, especially if there are difficulties in moving (for which you choose to use a brokerage company);
- Minimum amount to be paid and limitations: banks require a minimum payment of capital, which can start from several tens of euros (see also Viabuy ) up to much more expensive amounts;
- Professional services: that is the presence of professionals such as accountants, lawyers, bankers to manage a company (partially overcome with international agencies);
- Possibility of local activities: presence in the paradise of government subsidies or financing to undertake a commercial activity, if you also have this objective;
- Political and social stability: this factor is of fundamental importance as if a paradise is not stable politically it is no longer a safe place for foreign investors.
The main advantages
One of the biggest advantages is to guarantee maximum discretion for customers, facilitating the management of capital and also bringing numerous tax benefits. The same account (also open online) can also be used to receive dividends and interest from other offshore investments but always taking into due consideration the different fiscal aspects (which sometimes require the help of a well-trained tax consultant).
There are also additional benefits for all those who live in countries whose currency is unstable or the political situation is confused by keeping the savings in an offshore bank account and thus protecting themselves from possible risks.
In the face of numerous advantages, it is worth highlighting that this practice also entails disadvantages to be analyzed and not to be underestimated, which are mostly to be linked to out-of-pocket expenses to be incurred both in the opening phase and subsequently for maintenance.
It is inevitable that we should inform ourselves in detail in each case, or through trusted people who reside where we want to open the account or by taking advantage of the numerous agencies specialized in this kind of services and able to also offer personalized assistance to 360 °.