Offshore and onshore bank accounts

An offshore bank is a bank located outside the country of residence of the depositor, typically in a low tax jurisdiction or tax haven that provides financial, privacy and legal advantages. These advantages typically include: greater privacy also bank secrecy, low or no taxation, easy access to deposits.

Protection against local political or financial instability

Bank account

While the term originates from the Channel Islands being "offshore" from the United Kingdom, and most offshore banks are located in island nations to this day, the term is used figuratively to refer to such banks regardless of location, including Swiss banks and those of other landlocked nations such as Luxembourg and Andorra.

Personal income tax of many countries makes no distinction between interest earned in local banks and those earned abroad. Persons subject to US income tax, for example, are required to declare on penalty of perjury, any offshore bank accounts—which may or may not be numbered bank accounts—they may have. Although offshore banks may decide not to report income to other tax authorities, and have no legal obligation to do so as they are protected by bank secrecy, this does not make the non-declaration of the income by the tax-payer or the evasion of the tax on that income legal. Following September 11, 2001, there have been many calls for more regulation on international finance, in particular concerning offshore banks, tax havens, and clearing houses such as Clear stream, based in Luxembourg, being possible crossroads for major illegal money flows.

Offshore finance is one of the few industries, along with tourism, in which geographically remote island nations can competitively engage. It can help developing countries source investment and create growth in their economies, and can help redistribute world finance from the developed to the developing world. But equally, well resourced and developed countries such as New Zealand offer a safe and well administered background for these financial services.

Banking services: It is possible to obtain the full spectrum of financial services from offshore banks, including: Corporate administration, Credit, Deposit taking, Foreign exchange, Fund management, Investment management and investment custody, Letters of credit and trade finance, Trustee services, Wire- and electronic funds transfers

Not every bank provides each service. Banks tend to polarize between retail services and private banking services. Retail services tend to be low cost and undifferentiated, whereas private banking services tend to bring a personalized suite of services to the client.

Many advocates of offshore banking also assert that the creation of tax and banking competition is an advantage of the industry, arguing with Charles Tiebout that tax competition allows people to choose an appropriate balance of services and taxes.

List of offshore financial centers

Antigua and Barbuda, Bahamas, Barbados , Belize, Bermuda, British Virgin Islands , Cayman Islands (United Kingdom), Channel Islands (Jersey, Guernsey, Alderney, Sark and Herm) Cook Islands, Cyprus, Dominica ,Gibraltar, Ghana, Hong Kong Isle of Man, Labuan, Malaysia, Liechtenstein, Luxembourg , Malta, Macau, Mauritius, Monaco, Montserrat, New Zealand, Panama, Saint Kitts and Nevis, Seychelles, Singapore, Switzerland, Turks and Caicos Islands