Offshore Accounts – Everything You Need To Know

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A look at the many benefits of offshore accounts.

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Key Takeaways:

Any bank account that you open in a country other than your home country is termed as an offshore account. Offshore accounts prove useful if you wish to invest money overseas. An offshore account helps keeps your funds secure during instances of political upheaval and economic uncertainties in your home country.

To make international investments or send and receive money overseas, you can open an offshore account, sometimes also referred to as an overseas account. Like a regular bank account, you can carry out transactions, deposit money and access funds in the account using Debit Cards. The added benefit is that all such transactions happen in a foreign currency, without currency fluctuation hassles.

What Is An Offshore Account?

An offshore account is a bank account that you can open in a country other than your own. With such accounts, you can receive and make payments and deposit money in foreign currencies. For instance, if you reside in India and open a bank account in Nepal, your account in Nepal is deemed an offshore account.

Businesses often open offshore accounts to serve their overseas customers. High-net worth individuals (HNIs) may also open such accounts for investment purposes or if they travel to a specific country frequently. Countries that offer offshore account opening facilities are called offshore financial centres (OFCs) and usually serve as ‘tax havens’.

Benefits Of Offshore Accounts

An offshore account has the following advantages:

• Effective Movement Of Capital

  A crucial aspect of offshore accounts is that you need not move money between countries frequently. This way, you can reduce the costs incurred in the form of bank and currency conversion charges.

• Access To Global Markets

  Offshore bank accounts facilitate global investments. You are allowed to invest funds in the foreign market of the country in which you open the offshore account and other foreign markets too.

• Favourable Tax Laws

  In many countries where you can open an offshore bank account, the tax laws may be less stringent – The Caribbean, for instance. This is also one of the reasons why HNIs and businesses open offshore accounts. By making legal global investments, you can reduce your tax liability significantly.

• Asset Protection

  Political and economic uncertainties can lead to severe financial losses. You can reduce such risks by diversifying your portfolio and investing in global markets through offshore accounts. This way, your investments are protected.

• Standard Facilities

  An offshore account, like any other bank account, provides standard facilities, enabling you to access your account as needed. For instance, you get internet and mobile banking services and Debit Card facilities.

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Do You Need An Offshore Account?

Having an offshore account would be a good idea if:

• You travel overseas frequently
• You own property in a foreign country
• You intend to invest in global markets
• You wish to financially support your loved ones residing overseas
• You plan to move overseas permanently

Misapprehensions Surrounding Offshore Banking

Many consider offshore banking as a means of tax evasion. However, not all countries allow you to open offshore accounts. Also, most countries that provide offshore banking facilities, report such accounts to their tax authorities.  While offshore accounts were previously associated with the businesses and HNIs, anyone can open offshore accounts today.

Factors To Consider

Before opening an overseas bank account, consider these facts:

• Bank Reputation: It is important that you entrust your funds to a bank with a good reputation.
• Onboarding Provisions: Acquaint yourself with the account opening process – whether you can open it remotely or you need to visit a bank branch.
• Minimum Balance Requirements: Overseas banks may set varied minimum balance limits, which, if not maintained can lead to penalties.
• Security: In India, bank deposits are insured by the central bank for up to INR 5 lakh. Ensure your preferred OFC offers similar security.
• Taxation: While you may enjoy some tax benefits, you also may need to pay taxes on interest income and capital gains.

Final Note:

If you want to leverage global markets, an offshore account can prove beneficial. However, it is crucial that you report your offshore accounts to the relevant authorities and avoid tax evasion.

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*Disclaimer: This article is published purely from an information perspective and it should not be deduced that the offering is available from DBS Bank India Limited or in partnership with any of its channel partners.

The purpose of this blog is not to provide advice but to provide information. Sound professional advice should be taken before making any investment decisions. The bank will not be responsible for any tax loss/other loss suffered by a person acting on the above.