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An offshore bank account is an account set up in a country outside of the home country of the account owner. Such a bank account is usually set up after the offshore business setup process is completed, as it is often more convenient and faster to open a bank account after offshore company incorporation. However, it is not compulsory to have an offshore company having an offshore account.
Benefits of an offshore bank account 1. More privacy and security Having an offshore bank account implies that there is more privacy and security for the company. Offshore banks are not allowed to disclose any information about the company to the public.
2. Greater tax benefits Different countries have different tax systems with unique incentives available for businesses. Properly structured, by opening an offshore bank account for your offshore company, you will be able to minimize your tax obligations.
3. More convenient Having an offshore bank account would create more convenience. Banks providing offshore accounts also provide other facilities, including internet banking, multi-currency banking, better fix deposit rate and more. You can take advantage of these to perform transactions all around the world without having to go through the trouble of setting up new bank accounts in different countries.
Banks providing offshore facilities are more liquid in nature and hence funds can be moved much faster than traditional banks can allow. For example in Singapore, reputable banks such as DBS, OCBC offer excellent internet banking facilities with world-class customer services.
4. Multi-Currency banking facility As mentioned before, offshore bank accounts provide multi-currency banking. This would imply that your business can have a diversified currency portfolio such that you would not have to face the immense risk of currency fluctuations.
Moreover, global trade is easier to facilitate using these accounts as they also provide currency exchange services and may even feature a better currency exchange rate than in traditional banks.
5. Greater investment opportunities With an offshore bank account, you will have more investment opportunities than with your local bank because of the added access to international markets. You can then take advantage of international trends, whether located in the same region or another market.
6. Higher interest rates In some countries such as Switzerland, Denmark, and Japan, the banking interest rates are negative. Therefore, it would be more advantageous to open a bank account offshore to take advantage of the relatively higher interest rates eg. ABC Banking Corporation, a Mauritius bank with representative office in Hong Kong has a fixed deposit rate of 2%p.a.. With higher interest rates on savings, you will receive more returns that can be reinvested in the market.
7. Lower risk Not only does an offshore account reduce the market risk faced by your company by providing you with various facilities to diversify your risk, but it also helps to reduce political risk. If a country is politically unstable, investment in the country will be lower, which may even result in a recession. Any savings of your bank will be at risk because of government measures such as capital controls and tax increases to avoid insolvency. Having an offshore bank account would ensure that your money is not devalued because of governmental actions.
Additionally, diversifying your business’s assets into different countries and accounts would help reduce the risk of bank failures, currency fluctuations, and more. You will not be dependent on the financial market of a single country, but would have access to multiple markets. Offshore bank accounts can then serve as insurance against any possible risk arising in the home country.
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Disclaimer: Whilst reasonable care has been taken in provision of information above, it does not constitute legal or other professional advice. INTERSHORES does not accept any responsibility, legal or otherwise, for any error omission and accepts no responsibility for any financial or other loss or damage that may result from its use. In particular, readers are advised to take appropriate professional advice before committing themselves to any involvement in jurisdictions, vehicles or practice.
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