Offshore banking is a popular choice for individuals who are accumulated significant assets. Keeping these funds in countries such as the Cayman Islands, Switzerland, or the British Virgin Islands can provide more protection than the U.S. domestic banking system. This is due to the more favorable tax laws in these jurisdictions.
There are additional reasons for offshore banking in specific countries as they often offer better business environments, beneficial legal requirements, more secure protection of assets, and better privacy.
In recent years, the IRS has enacted new laws around the reporting and taxation of foreign held assets, and non-compliance of these laws can be costly. The regulations are fairly complex and nuanced, making it advisable to work with a qualified offshore bank account attorney who can clarify the legal options available regarding offshore holdings.
Keeping your assets safe
You may have read about civil and criminal penalties assessed against corporations and individuals who have run afoul of U.S. tax law with offshore banking. Some have even asked if offshore banking legal. Not only is offshore banking legal but it can serve as a valuable component of your asset protection strategy.
If you choose to take advantage of this option, understanding and complying with the IRS reporting guidelines is critical. All citizens and residents of the U.S. who hold assets in a foreign country when the combined value exceeds $10,000 at any time during a calendar year, must file a Report of Foreign Bank and Financial Accounts (FBAR).
Those who willfully hide or underreport assets in foreign accounts may be subject to investigation by the IRS. But individuals who follow the tax laws can take advantage of a number of worthwhile benefits associated with offshore banking. Since every country has different legal and tax requirements, hiring an attorney who deals with offshore banking is the best protection against the threat of noncompliance.
Where you should be focused
Used as a tool for estate planning and protection of assets, legal offshore banking offers strong advantages. As an example, the tax benefits of the Cayman Islands make it an attractive financial center for both corporations and individuals. The Cayman Islands is considered tax neutral because the government does not impose any corporate taxes or income tax, property taxes, capital gains taxes, payroll taxes, or withholding taxes on residents.
If you have questions about or need representation regarding offshore banking, contact our offices.