The term offshore banking refers to the process of banking outside the domestic country of the individual. The term offshore here refers to a foreign country; although it is thought to have originated from the fact that it was traditionally used for the small island nations off the coast of important developed countries which provided banking services.
Initially, offshore banking was thought off as a strategy for tax planning to take advantage of the favourable taxation and money transfer regimes. Offshore accounts were thought off as a privilege of the extremely rich and influential and were not considered as essential for business. But, over time people realised the advantages of offshore banking and it has become important for every financially aware individual owing to the following benefits:
- The security of having your assets in a more secure location if your home country is undergoing social or political unrest.
- Entry and exit of funds without any capital control restrictions
- Many offshore accounts provide a higher rate of interest than your domestic accounts.
- The interest income in many offshore countries is paid without deduction of any income tax.
- Diversity of investment which can lead to protection of your income in case of any unexpected catastrophic circumstances.
- Favourable taxation procedures thus protecting your income.