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Offshore Banking

Offshore banking involves placing money in an account outside your home country. For U.S. citizens and permanent residents, there are perfectly legitimate reasons for doing so, including:

  • Your primary residence is abroad or you plan to make it so. Alternatively, your home is in the U.S., but you spend extended periods of time in other countries, for business or pleasure. In all these cases, having sufficient access to your money while abroad may require establishing relationships with financial institutions that have a presence where you will be.
  • You live in the U.S. and your search for legitimate investment opportunities brings you to consider accounts that are not available here. International diversification, including the holding of financial assets denominated in currencies other than the U.S. dollar, is the chief motivation in this scenario.

The Internal Revenue Service requires all U.S. citizens to pay taxes, regardless of where they live and regardless of where their income originates. Holding an offshore account in an attempt to evade U.S. taxes is illegal and risks civil or criminal penalties. In particular, opening an account in a jurisdiction that is viewed as a "tax haven" by the IRS should be undertaken with extreme care, even if you have entirely legal purposes in mind. It is advisable to consult a tax attorney with expertise in offshore investing before opening any offshore account.

The concept of "tax haven" can be elastic, since certain higher-tax countries actually view the U.S. as one. From the IRSí viewpoint, a tax haven is generally a jurisdiction that offers financial secrecy laws in an effort to attract investment from outside its borders. These secrecy laws are attractive to people who are trying to hide assets and the income from them

Be extremely wary of scams, which are rife in the world of offshore investing. Unknown financial institutions, operations in countries without established banking systems, and/or

offers that sound too good to be true should raise red flags. Be prepared to do a lot of homework. Lean towards dealing with major, established financial institutions, especially those with long track records of above-board operations in developed countries.

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