Private Banking - An Alternative To Offshore Bank Accounts
Online, May 12, 2011 (Newswire.com) - Almost all legal citizens of a country have their own bank account within the jurisdiction where they are registered. These accounts can be personal or business related, and general understanding of them is broad.
When we start to talk about Private Banking Accounts, also referred to as 'Offshore Accounts' general understanding of this term is very weak indeed. Private Banking has a certain stigma attached to it, usually resulting from people referring to it loosely without really understanding what it is. A Private Banking Account is simply an account which is located outside of the jurisdiction where you are registered as a business or citizen.
A Private Banking Account located in a different jurisdiction is completely legal, if you have ever lived abroad the chances are that you already have, or have had, one of your own. People open these accounts for a variety of reasons, as they provide a range of financial and legal advantages including:
-Greater privacy for the holder
-Lower tax rates (why they are typically located in a low tax jurisdiction)
-Protection against financial or political instability
Why then, if Private Banking Accounts are legal, do they have this stigma and so often get linked with the underground economy and illegal activity? Books and Hollywood movies depicting a shady character depositing a suitcase full of cash into one such account may go some way to explaining it - coupled with the fact that a number of people do try to evade tax or engage in fraudulent activity in this way.
However, it is not as simple as that and there are several factors to consider, including the motives for opening the account, the regulation of the industry and legal tax avoidance to consider.
To start with it is important to dispense of this shady character with a suitcase full of cash idea. The Private Banking Industry is highly regulated, with the IMF (International Monetary Fund) monitoring the regulation of the industry. Any reputable Private Financial Institution will report suspicious or illegal activity and co-operate with the authorities on such matters.
It is also useful to understand the difference between tax avoidance and illegal tax evasion. Tax avoidance occurs when an individual utilizes a specific tax regime to his own advantage within the law. Tax evasion, by contrast, refers to conscious efforts to evade taxes by illegal means usually by hiding or manipulating the true situation in the face of authority in an attempt to reduce their liability. This can occur via the declaration of a lower income than is the case, or exaggerating deductions.
One should also dispense with the idea that taxation is the only motive for an individual opening a Private Banking Account. These accounts also frequently offer multi-currency accounts, security against financial or political instability in an individual's own country (an example being the economic crisis in Argentina in 2002) and importantly - confidentiality.
A common image when referring to Private Banking is of rich people on a yacht, but this is not necessarily the case. However, although you don't need to be mega rich to have a Private Banking Account, they involve fees which mean that unless you are prepared to invest a significant amount of money, you may not receive the available benefits. There is also no point in setting up a Private Banking Account if you really don't need it. If, however, you open an account, you can easily find the benefits outweighing the costs.
If you decide that a Private Account IS something that will be beneficial to you, it is prudent to follow the advice of any reputable Private Banking Company and find out as much as you can to protect your interests before starting the process. Please feel free to contact Capital Conservator (www.capitalconservator.com) for further information and to discuss your options.