Personal vs Corporate Offshore Bank Account

Offshore banking is no longer restricted to the small number of high net worth individuals. It is used these days by the majority of international firms and millions of private individuals. The motives for opening an offshore bank account can vary. For the majority of individuals the most common reasons include:

1) Protecting their assets from instability that can be due to the political and economic turmoil in their home country, threatening lawsuits and divorce or instability due to potentially large liability payments resulting from some high risk professions

2) Financial diversification

3) Lower banking commissions and better yields on their financial investments

4) Wider choice of financial instruments and customized high quality banking services

5) Greater privacy and confidentiality

6) Receipt of financial funds such as inheritance, winnings or other exceptional non-recurring financial settlements

7) Tax savings

When it comes to income tax savings, personal offshore account may not be the mot suitable option. First, outgoing as well as incoming wire transactions involving personal accounts will have your name and address listed as sender or receiver unless you own a numbered bank account (the so called anonymous bank account) which is not available in all jurisdictions. Secondly, the EU Savings Tax Directive that came into force in 2005 ensures that European citizens of the signatory member countries do not evade taxation by depositing funds outside the jurisdiction of their residence. The fact is that most countries known as offshore havens are signatories to this agreement. Hence, individuals seeking a peace of mind when hiding their incomes from the taxman should better use corporate offshore bank accounts. They provide them the ability to distance themselves from the account, effectively hiding their identity. Additionally, the EU Savings Tax Directive does not apply to the corporate accounts.

For achieving greater privacy it is recommended to open the corporate bank account in a different jurisdiction from that of your offshore incorporation. The obvious disadvantages of corporate offshore accounts versus individual accounts are their higher set-up and running costs and legal formalities required to open and operate them. The fact is that you can easily open you private offshore bank account yourself whereas for a corporate bank account you will need to hire a specialized law firm to do the paperwork for you and to provide the nominee directors.

If you open an individual offshore bank account you typically gain access to services such as deposit accounts, wire transfers, debit and credit cards, brokerage accounts and wealth and asset management accounts. Additional services that are only associated with corporate accounts include lending and overdraft facilities, merchant accounts and trade financing services.

Once you own an offshore corporate account you may get your money out of it by paying yourself dividends (but here you may be required to pay dividend withholding tax or personal income tax if you live in a country that applies such taxes on foreign dividends) or you can use debit cards to withdraw money anonymously from ATMs or use them to pay in shops. Although things may change in the future, at the moment ATMs and card processors only store the number of your card and not your name even though your name is printed on the card. Your name happens to be known only to your bank and the administrator of the global card database. However, it is possible to find offshore banks issuing corporate debit cards that do not show your name at all, only the name of your corporation.

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