Unfortunately, many people don’t know what an offshore account is. The good news is that this is about to change. As much as the expression is known as an illegal practice, you need to understand how it really works and what the goals are.
Knowing more about this subject helps you not to fall into traps in the financial market. Is every offshore account illegal? How does this practice work? And what’s the point? Let’s explain each point below!
What we will see in this article:
What is an offshore account?
The term offshore can be translated as “off the coast”, which represents the concept well within the world of investments. It is an account that is located in a country that the owner does not reside in, that is, an account in foreign territory.
There are banks and other financial institutions that provide the account opening service for people from other countries, who must follow the rules of the institution’s nationality, which can add many advantages. So much so that those looking for this option also end up opening an offshore company with an escrow account. Thus, the company operates according to the rules of the chosen country, benefiting in tax terms.
How it works?
In theory, the operation of the account is quite simple: the account holder opens it and uses it to make transfers, payments, deposits and other transactions. When choosing a country, it is common for those who use offshore companies to look for a “tax haven”, which are countries that do not tax income or have a much lower rate. They can also be territories that maintain secrecy in relation to the individuals or legal entities involved.
There are several countries that can be considered tax havens, such as Panama, Cayman Islands, Hong Kong, Switzerland, Maldives and others. When tax rules are more beneficial than the country of origin, opening an offshore company can be interesting. Do not you think?
What is the purpose of an offshore account?
Those who open an account abroad have the objective of taking advantage of tax benefits, at least the vast majority. Tax reduction, secrecy in operations and ease of movement are attractive points, but they are not the only ones. For example, people who trade with currencies from other countries get greater freedom of exchange.
In addition, it is possible to make deposits, investments and transfers with other currencies. As in situations where the fees for converting can be high depending on the country of origin and an offshore account ends up facilitating the process. Transactions follow the rules of the foreign country, which often already officially trade currencies. Not to mention that these territories also tend to have more political and financial stability.
Another very attractive objective when opening an account outside the countries of origin is the reduction of interest. For those looking for financing, financial leverage and other types of loans can benefit from offshore rules.
After all, is offshore illegal?
In theory, there is no illegality in doing this, which does not prevent malicious people from using this strategy to open an offshore company and carry out illicit operations. Whether for tax evasion, evasion of values, money laundering or other criminal activities, using the account as an instrument for this.
What must be understood is the purpose of who is using it. Also, avoiding paying taxes or taking advantage of reduced rates is not the same as tax evasion. If your operations are legal and you don’t use the offshore account to mask business, then it’s a completely legal service.
The problem is precisely using the account in conjunction with ghost companies to evade. This can indeed be considered a fraudulent practice, and the ideal is to rely on professionals in the area to have a complete advisory that guarantees the regularity of your operations.
How to open an offshore account?
After we talk more about the account itself, it’s time to understand how to open one. We separate some tips that you should apply to have more security. However, do not forget to count on a good professional specialized in this matter before anything else, especially with one who has contact with the country in which you want to open the account.
The Federal Revenue Service of Brazil has Normative Instruction No. 1,037 of 2010, which shows the countries that are considered tax havens. Take advantage and write down other cool tips:
1. Choose bank
Remember that even within the chosen nation, there are several financial institutions. As in Brazil, many banks offer the opening of checking, savings and investment accounts, it will also be like this abroad. Therefore, it is necessary to choose the financial institution for opening an account. Check the regularity of each and every condition.
2. Submit the required documents
Once the financial institution has been chosen, it is necessary to follow the procedures indicated by it. For this, you will have to present personal documents. For example, passport, CNH, RG, CPF or others.
Some will ask for proof of residency to demonstrate your domicile and also a statement of income. Thus, it will often be necessary to submit Income Tax returns and other tax documents from the offshore company.
As each institution has different procedures, you need to check directly with the chosen bank. With the internet, the task is usually easy. Either way, count on an advisory so you don’t have problems.
Were you able to better understand how an offshore account works? Remember to always do your research and understand the legislation used. As you have seen, as long as there is no shell company involved or illegal activities, the foreign account is legal and can be beneficial!
Onshore and offshore company: what are the differences?
In the business environment there are many terms that can generate doubts in people. Among them are the types of company: onshore and offshore. Do you know what they mean?
They are related to the origin of organizations and where they carry out their economic activities. In this way, the classification directly influences the tax benefits that companies receive.
For this reason, it is important to know the concepts to understand how they affect the market and even to make better decisions regarding your equity. After all, considering the concept can help you better allocate your capital.
Understand here.
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